At a consultation held on Monday last on Guyana’s preparedness for oil extraction, where several pertinent questions were raised, Chris Pateman Jones of the Oil and Gas Sector of consultant firm EY Global outlined what he referred to as the positives and negatives of oil production.
The positives were listed as diversification of the economy, attraction of international investment, protection of natural resources/environment, increased accountability of government, sustainable long-term wealth, and the opportunity for rapid economic development. The negatives, he said, were the increase in the value of currencies (Dutch disease), increasing institutional weakness, the cyclical nature of pricing, environmental damage, societal inequality/impact, corruption and uncertainty over longevity.
It should be noted that these are all possible pros and cons, none are guaranteed to occur, but some definitely will. And though the pros outweigh the cons, Guyanese should be concerned about pricing, damage to the environment and longevity, all of which are beyond the control of government and stakeholders.
The global price of oil is determined by production and this is currently controlled by the Organisation of Petroleum Exporting Countries, which sets targets and introduces cuts in output as it sees fit. Damage to the environment by oil extraction is usually due to spills, most of which are accidental. However, there is also the initial damage caused by the actual drilling that disturbs ocean habitats Guyana’s extraction is offshore. Longevity is perhaps the greatest unknown as there are several factors at play here. These include the drilling company remaining in business for the long term and also not being acquired by another company that might have different priorities.
There is also the issue of climate change and the slow but growing move toward clean, cheap energy all over the world. In the developed countries, there are entire towns that have eschewed the use of fossil fuels and are being run on either solar, wind, biomass and hydropower or a combination of these. Denmark, possibly the poster country for going green, is perhaps the world’s best example of this having reduced its oil imports for energy from 92 per cent in the early 1970s to less than 60 per cent today. The country’s energy needs are supplied by its massive windfarms, solar power and biomass generated electricity. It is on track to have 100 per cent renewable electricity by 2035 and 100 per cent total renewable energy by 2050.
In the United States, touted as one of the world’s largest consumers of fossil fuels, there are huge renewable energy projects in several states, like California, Washington, Texas, Oregon and New York among others. There are several in the pipeline, including the ambitious project by Elon Musk of Tesla Motors, who is expanding from the production of energy efficient cars to what he calls “end-to-end clean energy” by way of solar power. It is doable as Denmark has proven.
Then there is also the notion of peak oil, which has not been addressed in any of the narratives so far. Peak oil is referred to as the time when it is estimated that oil extraction will become so onerous and expensive that it will of necessity decline. Apart from climate change, peak oil is another of the reasons for resorting to clean energy.
Talk of greening Guyana has not extended beyond plans for hydropower and wind energy plants, neither of which is anywhere near fruition. Solar power exists, but it is underutilized. The current hype about oil extraction and its hoped-for benefits to this country, contradicts our posture on a green economy. And this is an issue that has not been fully addressed by government. Is Guyana moving towards sitting on two stools? Or can we really have it all? And if so, what is the long term plan (say 50 years down the road) as regards oil extraction? The answers to these questions have to be formulated by Guyanese and they call for far more in depth study of the oil and gas sector than has been done so far, including honest projections by experts in the field. Given that the 2020 production target is being regarded as ambitious, there is possibly a little more time in which to get these matters settled.
