With global oil prices rising and falling as part of a continued “boom-bust” cycle, Guyana is being advised to embrace “observer’ status within the club of oil producers referred to as OPEC+.
“Get to know the other oil producers; get to know global oil management but try not to take (an oil production) quota,” international energy consultant Robert McNally told those gathered in the Education Lecture Theatre (ELT) of the University of Guyana yesterday.
McNally, author of Crude Volatility: The History and the Future of Boom-Bust Oil Prices, was invited to Guyana by ExxonMobil’s Centre for Local Business Develop-ment as the first speaker in their oil sector teaching series for Guyanese titled “Join the Conversation.”
During the two-hour engagement he explained that in the absence of a non-OPEC “swing producer” the multi-national organization and its allies will continue to control global oil prices by choosing when to increase or decrease production. For this reason, he argued, it might be advantageous for Guyana to accept the invitation to join which is likely to be extended.
At peak production Guyana is meant to be producing 120,000 barrels of oil equivalent per day from the Liza-1 well. Production started up last month. By 2025, Guyana could be producing around 750,000 barrels of oil per day when two other wells come on stream.
“Guyana can act on the world stage to a degree it has not before; it will have power; it will have importance,” he noted, adding that the downside of joining is that Guyana will have to likely reduce production when OPEC+ orders such which would be bad for Guyana and for the producers.
“It is expensive to shut down production, it would delay cost recovery etcetera and Guyana would not want to do that,” McNally said.
The Organization of Petroleum Exporting Countries (OPEC) officially aims to “coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.”
The organization functions by assigning “production quotas” to each member and increasing or decreasing these quotas in order to affect the availability and therefore price of oil on the global market.
According to McNally, OPEC might however give Guyana a “pass” since they want to see the country succeed.
“The world wants Guy-ana to succeed. Everyone sees the danger here and abroad and no one wants Guyana to go down that road. You will find a lot of friends internationally,” he stressed.
The “boom-bust” oil cycle also has serious implications for the national budget.
Asked by a member of the audience how this country can work to protect and advance its own interest in the face of the “self-interest” of these international friends, McNally said “hire outstanding talent”.
Guyana will have to do what a persons would have to do if they come into a lot of money, hire investment managers whose interest are aligned with Guyana, he advised.
“You will have to hire talent whose interest align with Guyana’s. Guyana’s government will have to be democratic, transparent and accountable. There is a global market place. It can be retired individuals with knowledge who want to help, it can be part of your diaspora…set parameters, be transparent and it’s possible,” he advised.
Since 2015, the Guyana Government has been sharply criticized for not hiring experts in a range of areas to protect the country’s interests.
