Minister Trotman’s Remarks: Seminar “Governance of the Petroleum Sector: Preparing for First Oil”
Hon. Raphael G. C. Trotman, MP Minister of Natural Resources
“Governance of the Petroleum Sector: Preparing for First Oil”
- In May of 2015, international offshore oil explorer ExxonMobil reported its discovery of hydrocarbons in the Liza-1 exploration well. The well was drilled by ExxonMobil affiliate, Esso Exploration and Production Guyana Ltd. (ESSO), and its joint venture participants Hess Guyana Exploration Limited and CNOOC Nexen Petroleum Guyana Limited.
- It is just over a year since this report was made, much has transpired, and we are in an extraordinary process of transforming our nation.
- We now know that the Liza well contains a substantial deposit of hydrocarbons that are estimated to be within a range of 800 million to 1.4 billion barrels of high quality crude oil – possibly closer to the upper range.
- ExxonMobil and its joint venture partners have been working around the clock gathering data, assessing the reservoir, taking preparatory steps towards production and performing many investment calculations which led them, just yesterday – Wednesday 16th November 2016, to make Guyanese history by being the first to formally notify the Government of Guyana, in keeping with the Petroleum (Exploration and Production) Act Cap 65:01, that the discovery of oil is of commercial interest. This was the trumpet call that heralds the coming of “first oil”. There is now great expectation, great excitment and great responsibility in the weeks and months ahead.
- Yesterday we received that notification not only as the Government of Guyana but also as Guyanese citizens on behalf of all Guyanese – a watershed moment in our nation‟s history, one that impacts the very underpinnings of our previous existence as a people and alters the DNA of our present and future constructs – politically, economically and socially. Even the content of the neighbourly “over the fence gyaff” (conversation) as is our custom in Guyana will be altered forever. We are extremely blessed to have this opportunity and are pleased to have Exxon, Hess and Nexen as our partners in this historic venture.
- This historic occurrence is further highlighted by the juxtaposition of today‟s oil price, which hovers around what ought to be a discouraging $50US per barrel; yet this price offers us the unique and valuable opportunity to plan the development of our petroleum sector wisely and prudently – we have entered the petroleum industry at a conservative and watchful time when literally every cent matters more than ever. Our focus is directed into deliberate considerations of the possible returns on such an investment and how to maximize them for the benefit of our nation not just today but for generations to come. In local parlance, the oil price has immediately caused us to consider how to “stretch our dollars”.
- We are conscious of living in a moment that will not pass this way again and so the Government has embarked on a process of resource management that will recalibrate our performance and change our trajectory to better align our nation with her destiny. This event, convened under the theme, “Governance of the Petroleum Sector: Preparing for First Oil” is not only one in a continuum of capicity-building workshops, conferences and engagements, but firmly solidifies Guyana’s place in the New Producers Group.
- Development of the oil and gas sector is notorious for the risks and threats that it poses to economic and political stability, and the environment. Management of the sector is a major challenge for Governments and domestic institutions. The emerging consensus on mitigating risk is basically twofold: (a) Governments must put in place institutions and regulatory frameworks that allow for transparent and efficient management of oil revenue; and (b) oil windfall should be directed towards productive investments in physical and human capital so that long-term sustainable and equitable growth can be generated.
- Against this backdrop Guyana has sought and received support from a number of International experts and agencies for the development of its regulatory framework, prudent fiscal management policies and transparent processes for good governance. Our partners include the UNDP, the Commonwealth Secretariat, the United States Government through their Energy Governance Capacity Initiative (EGCI) programme, the Canadian Government through interactions with the University of Calgary on resource management and sovereign wealth funds and the Government of Mexico in an initiative to establish our own Petroleum Scientific Institute. A suite of new policies and legislation is soon to be presented for review through public consultations. They address the governance, regulation and development of our petroleum sector and the establishment of the institutional framework and agencies.
- The following compendium of policies and laws is scheduled to be completed in Draft format on or before December 31st 2016:
- National Oil and Gas (Upstream) Policy ii. Local Content Policy
iii. Petroleum Exploration and Production Legislation and Regulations iv. Petroleum Commission Legislation (regulation and oversight) v. Petroleum Taxation and Fiscal Legislation
- Sovereign Wealth Fund Legislation, which will include provisions for a Stabilisation Fund, an
Infrastructure and Social Development Fund, and a Citizens Participation Fund
- Public Communication Framework
- Today we are pleased to welcome representatives from the institutions which lead and support the work of the New Petroleum Producers Group – (1) Chatham House (Royal Institute of International Affairs), (2) the Commonwealth Secretariat and (3) the Natural Resources Governance Institute (NRGI), and the members of their team – all international experts who have served in varying capacities within government, private and not-for-profit institutions.
- The New Petroleum Producers Group is as its name implies. It is designed to provide a setting for open conversation on the oil and gas industry in the context of new and emerging states. The conversations focus on producing strategy formulation for good governance, business and sustainable environmental practices, while optimising a valuable resource for national development. Guyana has been a participant and beneficiary of these discussions over the past few years however since the May 2015 discovery announcement, Guyana‟s participation in the March 2016 meeting held in Kenya took on a different focus, we had shifted from a „hopeful‟ new petroleum producer to a „soon to be‟ new petroleum producer.
- The Group has lived up to its mandate by responding positively and practically to Guyana‟s change in petroleum production status and, apart from giving general advice and support as requested, the Group has also made Guyana a beneficiary of a unique and open exchange programme with Uganda called a „mentoring‟ exchange. Uganda was chosen and approved as a suitable mentor for Guyana having recently completed its preparation for oil production set to begin in 2017. Since Guyana is on a similar path, we will gain valuable insights from the recent experiences of Uganda which has established needed frameworks and institutions and has been diligent in its approach to developing its oil and gas sector.
- Since our visit in June, Uganda has since issued a total of eight Petroleum Production Licences to Tullow Uganda Operations Pty Limited and Total E&P Uganda B.V. I take this opportunity to once again offer our congratulations to the Government and people of Uganda and say how pleased we are to be a part of their historic progress as they are a part of ours.
- Today we also have a delegation from Uganda, two senior officials from the Ministry of Energy and the New Pet Producers Group – both here for the first time. This is a week of significant „firsts‟ for this nation, greatly encouraging, very exciting and quite sobering. Let us therefore put our collective shoulders to the wheel even as we celebrate what is and what is to come…first oil.
- Guyana is being proactive in its approach to this emerging sector to ensure that all mechanisms necessary for the effective management and the best outcomes for its people are in place even before the first barrel of oil is sold. The Government of Guyana, with support from the New Petroleum Producers Group, seeks to build the Capacity of our policy makers, officers, technicians, private sector professionals and other interest groups on the issues and challenges surrounding this emerging sector. These two days have been specially crafted to deliver potent „nuggets of wisdom‟ that will serve as a further catalyst for our development as regulators and service providers, advocates and defenders, policy makers and legislative drafters, all with the best interest of our nation today and for years to come as our firm foundation.
- The Government recognises the need for a highly skilled workforce and therefore revamping the public education system and integrating the supply and demand of labour into a flexible, technical vocational education and training system to rapidly raise skills are two key initiatives being undertaken so as to make the non-oil sectors competitive internationally. This is a deliberate step to counter the dreaded and very real, „oil curse‟ and „dutch disease‟.
- The Government also recognises those Guyanese who can participate in this sector today and also the need to ensure room for those who can participate in the near and distant future. This precious resource is ours. It is a significant part of our national patrimony and belongs to the people of Guyana. It is therefore our inescapable responsibility as a Government to ensure that this right translates into the concomitant right to work and develop within the sector. Really the sky is the limit. We have seen examples of locally grown businesses within the petroleum sector develop to the point of offering their skills and services internationally – we want no less for our own citizens. This is the thrust of our local content/local participation policy and regulations that are soon to be put before all of Guyana and our international partners for review. Our aim is to create avenues and opportunities for participation, transfer of knowledge and dissemination of the unique “caliber” of the petroleum sector into our own society so as to create as wide an impact as possible into other local industries.
- We have also embraced transparency and inclusivity of a wide cross section of stakeholders in various exchanges, some of whom are represented over these two days. The engagements with the New Petroleum Producers Group are a part of an active participatory approach to the development of policies and strategies for the resounding success of this sector. Our soon to be established Extractive Industry Transparency Initiative‟s Multi-Stakeholder Group and supporting Secretariat are other key signals of the Government of Guyana‟s commitment to good governance.
- Issues of environmental (including oil spill prevention and response) and social safeguards, and the alignment of the sector management with the country‟s environmental priorities are also focus points and must be addressed adequately. Guyana‟s priorities are aligned with its commitment to international obligations and responsibilities for the post 2015 developmental agenda. The Sustainable Development Goals have set a bench mark which we wholeheartedly embrace. Goals such as ensuring sustainable consumption and production patterns, taking urgent action to address climate change and its impacts, ensuring access to affordable, reliable, sustainable and modern energy for all; Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss; Conserve and sustainably use the oceans, seas and marine resources for sustainable development, are all goals that the Government of Guyana has on its agenda to astutely pursue.
- Guyana‟s 2016-2018 Roadmap speaks to a comprehensive approach to development under the guidance of advisory teams, committees and developmental partners such as those represented here today.
- Development of an implementation schedule for policies, legislation, regulations and the establishment of early stage governance and regulatory structures.
- Development of approach for public engagements. iii. Review of Guyana petroleum acreage and interests and development of a way forward. iv. Development of an extended training and capacity building plan.
- Development of a local content plan including the transition of work, intellectual capital and expertise to Guyana. vi. Development of infrastructural plan including establishing an onshore logistics base to support offshore operations.
- Assessment of the stages of the sector from exploitation to production with a view to managing the related decision processes.
- Development of an evolving framework to address the „challenges‟ of increased commercial and developmental activities.
- We are serious about utilizing our national patrimony in the best interest of the people of Guyana.
Guyana stands ready to accept support to develop this sector and to ensure that at every level, Guyanese will be intimately and intricately involved. The next two days will be filled with new information and interactions with and between experts and stakeholders. This is another noteworthy step in a series of productive engagements that must be had on the road to success. I encourage us all to make good use of this and every such opportunity to come. Guyana must prosper; its citizens must prosper; today, tomorrow and for future generations to come.
- Thank you and may God bless you.