The creation of a National Oil Company (NOC) will be “a disaster” for this country warns former Government Advisor on Petroleum, Dr. Jan Mangal who says that Guyana should learn from the experiences of sister Caribbean countries, Trinidad and Tobago and Jamaica.
However, the government says that it has been advised by a number of international organizations, including Chatham House of the UK, that a NOC would be beneficial to this country.
“Here we go again with national oil companies in the Caribbean. Both Petrotrin (Trinidad) and Petrojam (Jamaica) are in the news because of corruption,” Mangal said as he urged Guyanese to not support a call for the establishment of one here.
“Guyanese: Please remember these two nations have much larger and better run economies than ours, and much stronger institutions. Hence imagine what will happen in Guyana, with our weaker capacity, if elements in our government and their private sector cohorts are allowed to create a national oil company with access to our oil. It will be a disaster,” he added, pointing to recent scandals in Jamaica and neighbouring Trinidad and Tobago.
Recently, Jamaica’s Petrojam, which supplies a range of domestic, transportation and industrial petroleum products in that country, was hit with a number of allegations of corruption and victimisation. It saw questions surrounding the use of public funds snowballing in recent weeks during which there has been an outcry for Prime Minister Andrew Holness to act, the Jamaica Gleaner newspaper has reported.
Over in Trinidad and Tobago, a forensic audit report by the Canada-based Kroll Consulting Canada found that the state-owned Petrotrin paid a company, A&V, for oil produced between January and June of 2017, which it did not receive. In September, Petrotrin announced that it had launched an investigation into the reports of inconsistencies in the volumes reported from its exploration and production fields.
Mangal, whose contract as an Advisor to President David Granger ended in March of this year, has said that he will, “Outline the mechanism used by some oil companies and their local friends (in government and in the private sector) to defraud needy people in countries around the world, like in Guyana.”
But government says that although the establishment of a NOC is not in its immediate plans, there will be one formed sometime in the future and that it has been advised by several international organizations that it was the way to go.
“Government has been advised by several international organizations, foremost amongst which is Chatham House though Dr. Valerie Marcel, that the NOC is the direction we would be headed. We believe we will get there one day but it is not a matter that is on our list of immediate,” Minister of Natural Resources Raphael Trotman told Stabroek News when contacted.
Further, he added, “The rationale for a NOC is always that countries get a greater share of the revenue and at the same time gain valuable experience. We are keeping the idea alive but there is no discussion when.”
Other experts have also said that they believe that an NOC, if properly equipped with needed regulations and insulated from politics, would serve beneficially to the people of Guyana.
“State controlled oil major, is an absolute must! And the sooner, the better. NOCs control approximately 75% of the world’s oil market and 90% of the world’s oil reserves, evidence that having NOCs have become a normalcy. The advantages of an NOC are unlimited. In recent years, NOCs have developed global reach and influence,” a former United States Department of Energy Manager, Dr. Vincent Adams had told this newspaper, in an interview earlier this year.
“With the proper contract arrangement with the NOC representing the Government’s interest, the arrangement allows for personnel from the NOC working alongside their IOC counterparts and `learning by doing’, ultimately acquiring the ability to operate both within its own jurisdiction and abroad; thus, bringing revenues back to their home countries,” he added.
Vehicle
Most significantly, Adams believes, is that NOCs provide a vehicle for state participation and the ability to drive greater local content and capacity building in terms of directing the purchase of local goods and services. “The lessons learned from bauxite was that we were not ready for nationalization, since we failed to build the capacity to manage on our own upon nationalization. An NOC will give us that capability and strengthen our position in negotiations,” he asserted.
Using his country’s experience as a model, former Minister of Energy of Trinidad and Tobago, Kevin Ramnarine had also this year advised on an NOC but stressed that it must be insulated from political interference.
“This company’s board and management must be insulated from politics as is the case with Statoil (Norway) because if it is not, you will get a call to hire somebody’s nephew,” Ramnarine said.
“I would recommend that whatever state companies you form, it doesn’t have to be all, put part of the equity on the stock exchange,” he added.
He pointed to Norway’s Statoil and Russia’s Gazprom among other companies saying that Guyana can earn needed revenue through the establishment of such companies.
Pointing to the detriment of a state company influenced by politicians, as witnessed in his home country, he emphasized that before such a decision be taken here the companies must be removed from politics. “There is also the whole issue of political influence in state enterprises in Trinidad. When we look at the Norwegian company Statoil, their Board of Directors are independent, and for example the workers of Statoil get to vote on who should be a director…you begin to dilute the political influence in the company,” he posited.
The former People’s Partnership Energy Minister recommended that Guyana set up three state-owned companies. “I am going to recommend that Guyana sets up three state enterprises, one to participate in the upstream, alongside with companies like Exxon, one to focus on infrastructural development and one to focus on marketing of products… our new production-sharing contracts in Trinidad allow the ministry to market their own hydrocarbons,” he said.