The Government of Guyana is proactively and responsibly preparing for oil production
Ministry of Natural Resources, Guyana, Wednesday, October 6, 2016
The Ministry of Natural Resources has noted the perspectives and opinions expressed by members of the public on how the country should be preparing for the oil and gas sector. The Ministry welcomes healthy discourse and remains committed to continuing these conversations in an inclusive and consultative manner.
However, we also recognize that there is need for accurate information and wish to take this opportunity to provide such and also remind the public of the progress being made by the Ministry in preparing the nation for oil production.
International financial experts have assured that despite current market trends, Guyana will benefit when production commences, provided that the operations of the well perform as projected. They have also assured that no international company will sanction a project if the break-even price is higher than its forecast noting that large oil companies are especially well known for having very low price forecasts before they pour their resources into a project. Further, the experts have assured that despite the push for renewable sources of energy, oil demand – now at 94.1 million barrels per day worldwide – is still very high and growing.
We also ask that the following points from the 2015 OPEC World Oil Outlook (WOO) be considered – Global energy demand is set to increase by almost 50% in the period to 2040, with the overall energy mix continuing to be led by fossil fuels at almost 78%. Combined, oil and gas are expected to supply around 53% of the global energy demand by 2040. Mediumterm oil demand is revised upward, compared to the WOO 2014, rising above 97 million barrels a day (mb/d) by 2020; Oil demand is projected to be at 110 mb/d by 2040.
While we recognize that the oil industry is fraught with uncertainty, we do believe that industry experts’ projections can serve as a guide as to where the industry is headed over the medium and long term.
In Guyana’s case, while there are many variables that may affect production and the revenue that the country might earn through production sharing, taxes and other arrangements, we would be doing ourselves a disservice if we do not do everything possible well in advance to prepare for oil and gas production.
To this end, the Government of Guyana led by the Ministry of Natural Resources is in an accelerated process of development and capacity building to prepare for this new economic reality. The approach has included building and reinforcing legislative, financial and institutional capacity, drafting plans for the short, medium and long term as well as developing a robust communications strategy to keep all stakeholders informed of developments. Permit us to share some of our achievements to date.
- Technical Support
The Government of Guyana will soon be signing an MOU with the Government of Trinidad and Tobago for technical support and cooperation in the area of oil and gas. There is also a visit scheduled to Trinidad and Tobago to further the cooperation with a view to preparing Guyana for the oil and gas industry. This cooperation includes exchange visits between the two Caribbean countries and the offering of scholarships. Scholarship opportunities are also being pursued through several engagements with the Mexican Petroleum Institute (IMP) while support in capacity building was received from the University of Calgary and the Government of Canada for the development of a Sovereign Wealth Fund. The United Nations Development Programme (UNDP) has also provided support to bring regional and international experts together for discussions and knowledge sharing.
- Development of a Legislative framework
With the support of external expertise, the Ministry is actively working on creating a Local Content Policy to guide participation of local services and skills in the sector.
The Government of Guyana is also receiving support from the Commonwealth to prepare legislation for the oil and gas sector. In the coming months, the Minister of Natural Resources is expected to table eight pieces of legislation all connected to the oil and gas sector and which are necessary for the establishment and strengthening of the regulatory and fiscal policy frameworks.
- Financial Management
Members of the sub-committee of Oil and Gas in Cabinet last week met with members of the Bank of Montreal (BMO) upon the bank’s invitation. The Canadian banking institution which specialises in the natural resources sector, discussed financial investments, sovereign wealth funds, pitfalls to avoid, and managing risk and uncertainty in the industry. That two-day engagement ended on September 29, 2016. In addition, Guyana is receiving support from the United States Government in terms of governance through the Energy Governance and Capacity Initiative (EGCI). This is intended to build capacity to responsibly manage oil and gas revenues.
The Ministry of Natural Resources is taking the lead in ensuring Guyana signs on to the Extractive Industries Transparency Initiative (EITI) with a view to ensuring that there is transparency in the sector when the revenues from oil are received, as well as that of other extractive sectors.
While some processes require more time than others before tangible benefits are seen, the Government of Guyana through the Ministry of Natural Resources remains committed to the task of advancing efforts to explore Guyana’s oil and gas potential to the benefit of all Guyanese. We remain responsive to requests for information and invite the public to reach out to us.