When the decision is made in September on whether Guyana should establish a National Oil Company (NOC), it will be based on studies currently being undertaken by government and its “technical team” and not just blanket advice from organisations like the International Monetary Fund (IMF), Vice President Bharrat Jagdeo said on Friday.
“Often, the IMF doesn’t look out for our people, and I make this clear. The IMF has a different mandate. The IMF looks at, they were set up as an institution to deal with balance of payments problems around the world. They are not a development institution. They don’t even have expertise in oil and gas. They are a macro- economic type of organisation,” Jagdeo yesterday said as he updated reporters on the decision process for the potential establishment of an NOC here.
“So when we decide what we have to do in the future…It is a process that examines everything in detail and what is good for our country. Not with somebody telling us what is good for us. We can listen to advice, but people who don’t look out for us, often can just made a blanket statement like that,” he added.
Jagdeo’s remarks might be seen as an attempt to blunt any statements the IMF may make from a major upcoming review of the Guyana economy.
While not disclosing the composition of the technical team, Jagdeo said that government is working with local and foreign personnel to guide on a decision for the NOC.
He said that government has made it clear that “no foreign company would enjoy getting allocations of blocks offshore or onshore in a manner that it was done in before we found oil” and the new Produc-tion Sharing Agreement being crafted will ensure that.
During the PPP/C’s Ramotar administration, deals were suspiciously struck with several small companies – without exploration experience – for access to Guyana’s oil blocks just before the 2011 general elections.
In September, according to Jagdeo, a decision will be made on how the remaining offshore blocks will be disposed of, and at a later date, as it is not a priority, the government will decide on if this country would venture into onshore exploration. The country has two demarcated basins that have hydrocarbon potential–the Stabroek Basin, which is partly on shore and offshore Guyana, and the Takutu Basin, which is in the Rupununi area.
It is unclear how much of the offshore area is due back to this country through relinquishments by oil companies. An agreement was entered into with ExxonMobil for its continued works in the Stabroek Block on scheduled relinquished areas and the then government had in 2019 announced that the company had relinquished 20% of the Canje Block area.
On the remaining blocks, Guyana Geology and Mines Commission (GGMC) Commissioner Newell Dennison had in 2018 told this newspaper that from the rough determinations, approximately 9,500 sq. km is available within the coastal environment, 24,000 sq. km within the environment of the continental shelf, 10,000 sq. km within the deep water environment and 9,000 sq. km within the ultra-deep water environment.
Most interest has been on the offshore area and particularly in the deep sea following the major discoveries there by ExxonMobil in 2015.
According to a GGMC map that was updated in February 2020, there are not many areas left that have not been contracted out to companies. The companies that have blocks in the deep water area, offshore Guyana, are: Repsol and Tullow Oil (the Kanuku Block); Tullow (the Orinduik Block); Anadarko (the Roraima Block); Ratio Oil (the Kaieteur Block); Esso, CNOOC Nexen and Hess (the Stabroek Block); Esso, Mid Atlantic and JHI (the Canje Block; CGX (the Demerara and Corentyne blocks); ON Energy; and Nabi.
Jagdeo said that while a decision has been made on auctioning future blocks, the crucial decision would be if to go to auction with or without seismic data.
“We would have to go through an open process to ensure future blocks are auctioned. Do we auction with or without seismic data?” he questioned.
“We do know that no decision has been made about forming a NOC, at this time. We have really three options. Well, one has two parts; auctioning the blocks. And if we auction, how do we auction, with or without seismic? And then the third question is, do we allow Exxon and the others to participate in the auction given people argue that they have an overwhelming presence? If you give them a chance to participate and they win, then you have higher concentration. But on the other hand, if the big ones don’t participate, you might get a less price bid and or you might not get as much money as you want from the auction. So those are the variables,” he explained.
The Vice President emphasized that the PPP/C government has “nothing to hide here” and that the public will know the reasons for whichever decision it takes in September.
Not only has the IMF warned against the setting up of an NOC here.
Chatham House fellow and oil consultant Valerie Marcel had in 2019 told a conference that Guyana’s green energy transformation could be realized if it doesn’t buckle to pressure for downstream investments in oil here and the country should instead focus on diversification.
By June, an IMF team will be visiting Guyana for Article IV consultations where it will meet with government officials and collect information and data as it assesses this country’s economic developments.
An IMF spokesperson had told this newspaper the organization expects the consultations “to take place in the first half of 2022.”
The oil and gas industry would likely be a major focus of the consultation.
National Oil Companies have traditionally been prone to deep-seated corruption and inefficiencies. With Guyana having weak institutions and a perceived major problem with corruption, an NOC would not be seen as appropriate.
Trinidad and Tobago’s now dissolved Petrotrin and Venezuela’s PDVSA have been held up as examples of failure.
A 2011 World Bank report had said “Some of the key issues identified for NOCs and a state-led petroleum sector include: the economic cost of political intervention; the operational inefficiencies of NOCs; unsatisfactory delivery on noncommercial objectives; inadequate corporate governance arrangements; inappropriate sector organization; and issues related to funding arrangements and the scarcity of public funds”.
