Less than a year after receiving news of the country’s first significant oil find it must surely be a sobering thing for Guyana to watch neighbouring oil-rich Venezuela experience a condition that now bears a conspicuous resemblance to an economic freefall as the price of crude oil, which brings in more than 90 per cent of the Bolivarian republic’s earnings, continues to tumble.
Last week, the country’s beleaguered President, Nicholás Maduro announced that he would have the country’s Oil Minister pull out all the stops “to reactivate all procedures with OPEC and non-OPEC oil-producing countries to stop this price war and recover the market,” a sign that Caracas is now desperate to see a swift change in the direction of oil prices.
As it happens, the immediate portents for an upturn in global oil prices appear bleak, particularly given the fact that the now sealed deal with Iran removes sanctions against the world’s fourth largest oil producer and re-opens Teheran’s vast crude oil reserves to the rest of the world. The short-term prospects of Iran beginning to release onto the global market the 30 to 40 million barrels of oil which it reportedly has stored in tankers off its coast will, in the period ahead, push prices down even further.
In May last year when ExxonMobil announced that its affiliate Esso Exploration & Production Guyana Ltd had made a significant oil find on the 6.6 million Stabroek Block, located approximately 120 miles offshore Guyana, oil was trading at around $100.00 per barrel. At the end of last week it had nose-dived to $24.00 per barrel.
That is what partly accounts for the fact that there has been less official and public hype than might have been expected about Guyana’s longer-term prospects as an oil-producing nation, now we have had confirmation of significant reserves. Understandably, and after years of waiting and hoping, there had been a brief upbeat national response to the announcement of an oil find. Not only did that response not reach anything even remotely resembling euphoria but it receded as quickly as it had surfaced, the fact being that we have lived for decades with the promise of an oil find. In the process we have, as a nation, come to what is at least a rudimentary understanding of the vicissitudes of the global oil industry to say nothing about the considerable interregnum between an oil find and Guyana becoming what one might call an oil-producing nation.
In an interview with this newspaper last week Natural Resources Minister Raphael Trotman proffered equal measures of enlightenment and soberness on the country’s prospect for an oil economy. He pointed, first, to the coincidence between Guyana’s oil find and the prevailing volatility of the wider oil industry. Equally significant was Mr Trotman’s attempt to place the country’s oil find within the wider contexts of both its capacity to provide a response to the country’s energy needs and ways in which it might affect our global environmental profile.
To take the second point first, Minister Trotman interestingly described as “a paradox” the coincidence between Guyana’s recent oil find and the country’s aggressive efforts to strengthen its environmental profile, contending that in our circumstances there will now be even greater pressure to minimize the negative environmental effects of fossil fuel. There is, according to Mr Trotman, no lack of awareness on the part of the APNU+AFC administration that as Guyana moves closer to becoming an oil-producing nation the country’s adherence to creditable environmental credentials are likely to come under increasing international scrutiny; and while the Minister concedes that in the context of the economic prospects which oil offers, Guyana can hardly afford to look a gift horse in the mouth, the government, he says, is not unaware of the external pressures it faces as it seeks, simultaneously, to maximize the advantages to be derived from an oil sector whilst pursuing oil exploitation practices that are harnessed to best practices in the sector.
Then there is the coincidence between the announcement of Guyana’s oil find and the constant falling away of global oil prices, a circumstance which, Minister Trotman points out, does not offer a particularly favourable environment for oil exploitation at this time, though he is quick to point out that the current absence of demand for the equipment associated with oil exploitation makes its acquisition cheaper.
Perhaps the most significant disclosure made by the Minister during his recent exchange with the Stabroek News was the fact that the prospects of an ‘oil economy’ notwithstanding, the administration continued to regard hydropower as the vehicle with which to meet its immediate – and perhaps even its longer-term – energy needs. It was, one sensed, not an attempt to either dismiss or underplay the significance of the country’s oil find, but to continue to demonstrate its determination to continue to embrace the more environmentally friendly energy option. At the same time, by making clear its intention to keep the country’s hydropower prospects in focus, the government is adding a sobering measure of realism to the national response to the recent oil find. The prevailing behaviour of the global oil industry would appear to justify that posture.
