Introduction
Today’s column wraps-up my presentation of the call for a National Oil Company, NOC, as a policy choice and action the Authorities should commit to by the mid-2020s. That is, a window of 3-4 years from now. It also reinforces the development paradigm which guides my weekly efforts. As noted in the Conclusion to last week’s column, public discussion on this topic has evoked considerable controversy.
Further, I had observed as well in my Conclusion that, as many readers might have expected, the public controversy has thus far broadly reflected (perhaps unintendedly) the different development paradigms and praxes always at stake in policy choices and options.
Focusing on the extremes in the controversy, one pole seems to prioritize the need to 1] constrain foreign dependence and control over natural resource exploitation, and 2] correspondingly expand the nation’s influence over its natural resources’ exploitation. And its polar opposite prioritizes 3] expanding the opportunities for markets to guide natural resource exploitation and 4] confining the roles of government in natural resource exploitation to regulation, monitoring and similar oversight functions.
Fine-tuning observations
I take the opportunity at this point to refine two observations made last week and introduce a third. First, while indicating my rejection of the IMF’s preference for a State Holding Company I had offered no reason for this. However, my rejection is based on the fact that the IMF proposal for a State Holding Company is conceived as restricted and confined to financial interests, with very limited involvement in operational decision making.
Second, not mentioned is fringe support for a generic national energy company. I had previously expressed considerable sympathy for the establishment of a National Energy Company, as distinct from a NOC. However, on this matter, readers might recall my call for the establishment of an Energy Ministry or Agency as a priority for spending Guyana’s expected windfall earnings from its oil discoveries.
And, parenthetically, it is of some note that, the Authorities in Suriname’s state-owned petroleum sector [Staatsolie] have publicly advised their Guyana counterparts to go the route of creating a NOC [ see several headlined articles in Oil Now and Kaieteur News, November 2020 – March 2021]
NOC’s in practice
Regrettably, most readers are unaware of the dominance of NOCs in the global oil economy. Mis-information rules in several print and social media. Trend data reveal well over half of global supply has been produced by NOCs; it was 75 percent in 2021. Moreover, 90 percent of reserves is held by NOCs.
Today, NOCs provide hundreds of thousands of jobs. Sales [domestic and export] generate multi-billion US dollars in financial assets. Indeed, so vast are their financial accumulations and impact on jobs and government revenue they are referred to as “behemoths”.
Under-analyzed behemoths
Given the brief data cited above, clearly NOCs need to be organized; starting with the provision of standard, systematized, official data regularly published. As correctly observed: “considering their importance, NOCs are relatively under examined”. And, such views led to the creation of the NOC online interactive comprehensive database. This facilitates 1] “filling knowledge gaps” 2] “serving as gatekeeper’ for international oil companies, and 3] handling large portfolios of public assets, and being involved in executing complex projects. Such projects are not confined to oil but cover oil-related areas (infrastructure, technology transfer and domestic linkages).
The database’s website observes: “Effective NOCs deliver significant value to their stakeholders via fiscal revenue … successful exploration efforts and the development of new skills and technologies.” It further notes that “NOCs have traditionally been poorly understood”. This, it indicates, has been due to earlier poor reporting on these companies, sparse research and consequent absence of reliable comparative data, which the database, presently fills.
The database, available at www.nationaloilcompanydata.org, covers key areas like production, revenue, fiscal transfers, operational and financial performance based on a standard methodology.
Essentials and endeavour
Readers should constantly bear in mind that my recommendation for establishing a NOC is Natural Resource Charter-bound; one: “offering policy options and practical advice … on how best to manage (Guyana’s) natural resource wealth”. The goal is ensuring it draws on accumulated experiences… learns from history, and avoids past mistakes.
Establishing such a NOC is clearly a long-term endeavour. If one is to be established by the mid-2020s, preparations should be set in train by year end. The main reason for early action is that serious concerns over accountability and governance have arisen in regard to several NOCs. The authority and governance framework, under which they operate, have often proven to generate serious conflicts of interests, as well as outright corrupt practices and bad governance. I believe this is because NOC rules of operation of have to be carefully reconciled with their commercial roles along with international best practices for both public and private governance.
Conclusion
In conclusion I assert unapologetically three policy positions which I hold in regard to Guyana’s emergent oil and gas sector. First the authorities must strive their utmost to control the shaping of domestic timelines for the sector’s evolution going forward. This includes the pace of expansion, its ownership and operational control, as well as positioning in the broader political dynamic of the country’s oil and non-oil sectors.
Second, Guyana’s (and Caricom’s) poor have rights and entitlements to a share of the windfall revenues from oil and gas. In the Buxton Proposal this is set at a maximum of 10 percent of net cash flow.
Finally, the Authorities must not be deceived by the noise and nonsense in much of the global climate transition lobby into 1] stranding its petroleum assets, and 2] abandoning Guyana and Caricom’s poor to cover for the past and ongoing “might is right” misdeeds of the global rich.