When governments become enraptured with the scale of monies flowing into their economies they lose interest in any real regulation or oversight that might constrict the bonanza.
Groningen in the Netherlands is an example of this sickness, not the Dutch disease, perhaps worse and a cautionary tale for the Guyana Government which behaves more like a partner of ExxonMobil and not as guardian of the State, protector of the country’s natural resources and overall regulator of the oil and gas industry.
On February 24, a Dutch parliamentary committee skewered the government in The Hague, Shell and ExxonMobil for ignoring the evidence that homes in the Dutch city of Groningen were being compromised by gas extraction. The Groningen gas field had become a cash cow for the Dutch state, Exxon and Shell.
The committee estimated that gas profits had delivered 363 billion euros (US$383.84 billion) to the Dutch treasury since production started in the 1960s, laying the foundation for the Dutch welfare state, while Shell and Exxon’s profit was about 66 billion euros.
Two asides are immediately worth noting. Though the commercial agreement would have been tailored to fit the prevailing global circumstances in the 1960’s, the Shell and Exxon take was only 18% of the Dutch state’s take over the period – far different from the rapacious deal imposed by ExxonMobil on the effete Granger administration in 2016. Second, the Dutch committee’s work evinces the value of Parliament in interrogating what is happening in the economic and social life of the country. When it is bipartisan it is an excellent tool for establishing accountability in government and MPs really earn their keep. Even if it isn’t bipartisan parliamentary investigations of this type are of inestimable value. It will not be possible to have a real bipartisan investigation here under the current list system. The PPP/C MPs will unmistakably parrot the government line when the script is delivered to them even if they don’t sound as if they know what they are talking about. That, however, should not restrain the moribund opposition from instituting probes in the various sectoral committees where they are represented and to convene public hearings. Otherwise they are collecting money for doing nothing. It’s time for APNU and the AFC to start doing real work – we mean real work – in Parliament.
According to Reuters, the Dutch parliamentary committee found that Prime Minister Mark Rutte and others involved “gravely underestimated” the immediacy of the problems in Groningen where the gas field is operated by the Shell and Exxon joint venture, NAM and was one of Europe’s major suppliers of natural gas for decades. Thousands of homes and buildings were undermined by earth tremors stirred by the massive extraction of gas.
Following the committee’s report, a statement from NAM director Johan Atema said: “It is clear that we need to have a better eye for the society in which we work. It is up to us to show that we as a company have learned from this.” A bit too late in the day for contriteness when action should have been taken years ago.
For its part, ExxonMobil welcomed the report’s publication and said: “We hope the report brings clarity for the Groningen region and its people.”
It added that the publication of the report “is a key milestone in the extensive work undertaken by the Parliamentary Inquiry Committee to capture the history of the Groningen gas production, the tremors, the tremor response and the impact on the wider region”.
It added: “ExxonMobil has cooperated fully with the Parliamentary Inquiry Committee. Moreover ExxonMobil employees that participated in the hearings gave open and transparent testimonies about ExxonMobil’s involvement in the Groningen gas venture and fully supported the truth-finding objective of the Inquiry Committee,” the company said.
“We will now take the time to analyse the full report and its recommendations”, it said, as it well should.
According to the final report, “the Netherlands has a debt of honour to the people of Groningen”.
The report also found, according to Upstream, that “in the debate that followed the many previous reports and recommendations on gas extraction in Groningen, one element was missing for a long time: the moral perspective”.
“Gas extraction in Groningen was so successful and lucrative for the Dutch government, [and energy giants] Shell and ExxonMobil that little attention was paid to the long-term risks and ever-growing signals about adverse effects that the people of Groningen had to deal with,” the report said, adverting to an earthquake near the village of Huizinge in 2012 as the “first tipping point”. That temblor was followed by more than 600 tremors in the Gronginen area.
Following on APNU+AFC’s lead, the PPP/C government has exhibited gross dereliction in relation to oversight of the oil and gas sector. Scandalously, despite early promises by President Ali and his Natural Resources Minister, the administration has failed to present legislation to Parliament for a Petroleum Commission even though oil production is more than three years old and gas extraction is set to begin shortly. The government now seems to be moving to have the Guyana Geology and Mines Commission take on more oversight responsibilities when it is not geared for this and is hardly even performing its current mandate.
There are now myriad angles to be pursued in oil and gas oversight. If the government won’t do it then the opposition in Parliament and civil society have to continue trying to fill the breach.
Short of immediate constitutional reform for a sectoral committee on oil and gas, a subcommittee of the Natural Resources Committee should be focusing full-time on the industry. There are many angles and it must begin summoning, ExxonMobil, its partners and subcontractors to regular hearings.
The 2016 Production Sharing Agreement and its dubious inviolability must always be the starting point and encompassing issues such as ring-fencing of production costs, the royalty rate and increased profit to Guyana as oil extraction expands. A depletion policy must also be devised and founded on both the need to protect resources for future generations and to honour Guyana’s obligations to the battle against climate change. The formula enshrined in the Natural Resource Fund for allocation of the annual oil revenues should also be scrutinised to possibly have even more monies set aside for future generations and to protect the economy.
The risks of offshore oil and gas extraction should also be investigated in great detail so as not to mask the threat to people, flora and fauna and the environment. Environmental impact assessments done by consultants hired by the Environmental Protection Agency should be subjected to peer review. The economics of gas commercialisation and the wisdom and safety of locking the country for decades into transforming gas into energy must be explored.
There is an equal number of relevant investigations that can be undertaken by the Economic Services Committee of Parliament including whether the last three years have put Guyana on the path to the Dutch Disease and the Resource Curse or progress is being made in radically transforming the economy away from primary production including oil and gas.
The plight of the people of Groningen underlines how desensitised governments can become to their own people’s welfare as long as the money is flowing and there is flaccid oversight. Guyana must not fall victim to such a travesty.
