“The Way Forward for Guyana’s Emerging Petroleum Sector”
Keynote Address: Caribbean Virtual Oil & Gas Business Summit (CARVIS) September 15-17, 2020. Hon. Vickram Bharrat, M.P., Minister of Natural Resources
Heads of Government, Members of the International and Diplomatic Communities, senior representatives of various oil and gas companies, distinguished speakers and participants, members of our Caribbean community, ladies and gentlemen, it brings me great pleasure to address you at this summit, CARVIS 2020 – a ‘virtual’ first of its kind for our Caribbean community, and certainly a first for Guyana as a recently established petroleum producing nation. I bring you greetings on behalf of His Excellency, Dr. Mohamed Irfaan Ali, President of the Cooperative Republic of Guyana. His Excellency has bestowed upon me the honour of representing him at this Summit and it is, within this vein that I address you in an effort to connect, examine, and share, not only Guyana’s advancements regarding our oil and gas sector, but highlight the way forward in its development.
This event is testimony to the fact, that even as we face challenging times globally, regionally and nationally in ways that are common to us all, yet in many other ways that are unique to each nation’s circumstances, humankind has once again proven its ability to persevere and thrive through innovation. Therefore I acknowledge the organizers; Valiant Business Media UK and Guyana for hosting an event of such magnitude. In this difficult period of suffering and anguish that the COVID-19 pandemic has brought upon countless families and communities, we gather today with vigor, with hope and with the determination required to build an even brighter future. And to put it into perspective, I quote John H. Schaar “The future is not a place we go to, it is a place we create”. For this reason, we have gathered here, at this time, at this Summit. Now more than ever, we must think about ways of overcoming individual challenges in this sector and by extension explore ways of collaboration and possible cooperation with potential opportunities for investment and technical assistance.
It is on this note that I bring your focus to Guyana today. A seemingly small nation but with a resilient and ingenious people. Guyana’s emerging petroleum sector has heralded a time of hope and vision of achieving the potential often spoken of in our national song “Oh Beautiful Guyana”. At a time when the nations around the world are grappling with declining economic growth, Guyana is on the rise. In May 2015, with the Liza discovery, Guyana was the country that reported the largest hydrocarbon find for the year, now just a few years later, in September 2020, Guyana is a new petroleum producing nation with over eighteen oil discoveries to her credit, and a vibrant petroleum sector in the making.
Esso Exploration and Production Guyana Limited’s 18th discovery in the Stabroek Block was recently announced by yours truly, just a few days ago. This established a discovery rate of 90%, and an estimated resource base of over 8 billion recoverable barrels of oil and substantial volumes of associated gas. The Government of the Cooperative Republic of Guyana, through the recently installed administration led by His Excellency, has the historic task of ensuring that Guyana’s development of this sector creates a national impact that generates immediate and long lasting benefits for all Guyanese, present and future.
The Government also has the task of strategically guiding Guyana’s growth and opportunities so as to create a positive and long lasting regional and global impact on the developmental efforts of its sister countries in CARICOM and around the world.
In all of this, we will not lose sight of our most important resource, our people – their needs, their hopes, their rights to a quality of life, to education, to health, to safety, to a future.
This Government will approach the oil and gas sector in a national, non-partisan manner. We are fully aware that this sector will bring not only significant financial resources and enormous transformational opportunities, but also many challenges. There are many examples around the world where developing countries have obtained windfalls from oil and gas but eventually, ended up poorer than before. The resource curse will not be taken lightly and we will learn from the experiences of others.
It must be noted however, that our work is guided by several pillars which include good governance, increased value extraction, efficiency, improved transparency, accountability, predictability, balance, and evidence-based decision making. This will aid in avoiding the negative effects as mentioned before.
Guyana is preparing and transitioning for one of the most momentous occurrences in its economic history – the emerging oil and gas sector. This preparation required the building of human and institutional capacity, crafting and agreeing to some critical policy and legal measures such as the Natural Resource Fund (NRF) and the Crude Lifting Agreement (CLA), and pursuing strong support and coordination amongst a number of governmental and non-governmental agencies.
The year 2020 brought us not only the COVID 19 pandemic, but also resulted in an industry crisis in human resources and oil prices. It is fair to say that in any usual year, managing a new petroleum sector and industry would be a major challenge for many of the Governments in the developing world. Our Government though informed, is not swayed by these factors, but has set a path and engaged various strategies to ensure an increased and enhanced focus on establishing and delivering various measures that would ensure the best gains for Guyana and Guyanese with the prevailing circumstances, and, in spite of them.
Central to our strategy are three critical areas:
- A governance and regulatory framework for proper and sustainable management of the resource.
- Transparency and accountability.
- Securing benefits for all Guyanese.
To ensure that our oil resource is managed responsibly, the Government will:
- Immediately engage the oil and gas companies in better contract administration and renegotiation.
- Establish a Petroleum Commission to provide the much needed technical oversight to enhance the regulation of the petroleum sector.
- Establish an arm’s length Natural Resource Fund insulated from political interference.
- Define by legislation how funds will flow from the Natural Resource Fund into the budget, and the purpose for which they will be used.
- Ensure that expenditures are transparently determined and go through the Parliamentary process.
- Establish a model Production Sharing Agreement based on industry-wide standards and best practices. The purpose of this is to ensure that Guyanese receive maximum benefit from these contracts without dis-incentivising foreign investors in the sector.
- Training of thousands of Guyanese at every level to create a national core of managers and workforce to chart the future direction and effectively manage the sector.
To prevent oil monies from being squandered or misused, the Government will among other things:
- Uphold the Santiago Principles of transparency and accountability and the Extractive Industry Transparency Initiative
- Criminalize non-disclosure of receipt of funds from oil revenues
- Ensure annual reports from the Government are laid in the National Assembly detailing oil revenues and expenditures.
- Ensure there are regular audits
- Involve Civil Society in a central role to monitor compliance and accountability
The oil resource, as all Guyana’s natural resources, belongs to the people of Guyana. Our Government will ensure that oil revenues works for all Guyanese, and is spent on improving people’s lives and wealth generation.
Some areas in which oil revenues will be directed are:
- Support for job creation
- World class education and health care systems
- Social and economic infrastructure
- Targeted cash transfer to Guyanese particularly the elderly, children, the poor and other vulnerable groups.
- Strong local content with legislative safeguards
- Savings for future generations
- Tax reduction for local businesses and individuals
His Excellency, President Irfaan Ali in keeping faithful to these promises, has already established a high-level Panel on Local Content in the oil and gas sector. This panel is charged with the responsibility of supporting the development of legislation to pave the way for local content development and allowing Guyanese to extract more value from the oil and gas sector. We are also in the process of establishing a Technical Task Force on natural gas to ensure that not only that gas is brought to shore in the shortest possible time to reduce our energy insecurities in the power sector, but also have an over-all plan for the utilisation and monetization of gas. Another early and key initiative is moving to have the Petroleum Commission Bill passed in the National Assembly so as to effectuate the establishment of the Petroleum Commission and provide the technical institutional framework for the enhanced regulation of the sector.
Further, expenditure allocations in Budget 2020 will serve to support access to expertise in marketing of crude oil and cost audits, to ensure that we are able to maximise the benefits that flow from this resource. We have also increased the allocation to the Guyana National Bureau of Standards, which has responsibility to facilitate accurate measurements and metering on the FPSO, from $298.6 million to $586.5 million, to ensure that they are fully equipped to execute this critical oversight responsibility.
The sector will deliver to the Guyanese people, but much more has to be done. For example, Guyana has already received payment from its first three lifts and two royalty payments totaling over US$144 million. These monies have been deposited into the Natural Resource Fund.
- The Guyanese economy saw over US$300 million dollars in direct investments in the last year.
- Oil and gas companies employed over 2,000 employees representing an average of 56% of the workforce in this sector,
- The companies have trained over 200 Guyanese.
- They have engaged over 600 Guyanese small businesses,
- And over 70 joint ventures with local companies were established.
This Administration continues to emphasize the need for greater capacity building, standards raising and knowledge transfer.
Our Government continues along this transformational path to implement various policy, legal and technical initiatives, so as to streamline operations within the sector and address the related growth matrix, which ensures the holistic development of other sectors of the economy –such as agriculture and manufacturing, fisheries and export to name just a few.
In managing this sector, this new and vibrant industry, our Government remains cognizant that Guyana’s oil and gas sector is expected to be catalytic and pivotal in transforming our economy, our lives, and our future – nationally, regionally and internationally.
It is therefore with all sincerity, that the State and people of Guyana salute those from all sides and disciplines for their significant contributions towards the sector.
I close with a quote by His Excellency President Irfaan Ali; “There must be no doubt in the minds of our people that our country, our nation, our people are the beneficiaries of the oil and gas sector… We stand at the beginning of a road that could lead us all to a bright and prosperous future – a future that could take us to the famed ‘El Dorado’”
As we develop, explore, and sustain our nation’s patrimony, I restate that it is the Government of Guyana’s every intention to ensure that these resources are utilized to the benefit of all Guyanese.