-in New York Times interview
Interviewed by the New York Times (NYT), President Irfaan Ali said he sees an oil future for Guyana past 2050 but was pressed on the inherent contradictions with a low carbon economy and repeatedly dodged a question about taxes on the petroleum industry.
The Head of State was at the time responding to questions from the newspaper’s International Climate Correspondent, Somini Sengupta on September 25 during a visit to New York.
“Why embark on oil now when there has been a global commitment to transition away from fossil fuels and a concern that some of what you are banking on, literally, may be a stranded asset leaving your taxpayers to hold the bag. How long does oil have a future do you think in your country?” the journalist questioned.
“Well first of all we have to examine the premise of the question.., we all know that petroleum and the petroleum industry will still have a space in the energy matrix…in my view long beyond 2050,” the President responded in part.
He then questioned if the petroleum energy mix just accounts for 25% who is going to provide that percentage and who will determine who does. He is of the view that should the climate equation be the determining factor on who produces that 25% then the leading country will be Guyana and it will do it with the least damage to the environment.
Sengupta pointed out that Ali has been an outspoken champion of Guyana having the right to exploit its own resources and she questioned with some incredulity whether he was saying he wants Guyana to be producing oil long past 2050.
“I am saying three things. One, the reality, let us examine factually what is taking place. Where is the capital coming from for the developing world for the just transition into renewables? Where is the battery power coming from? Who controls the market for the battery power? How much of the environment will be subject to destruction to get the raw material for the supply of battery globally? What is the replacement cost for (the) battery? What is the financial model in terms of this replacement cost? Those are questions that we seek to avoid.
“For Guyana, we are very clear, we are very clear as a developing country that we have to find resources, we are below sea level, to build sea defences, to invest in drainage and irrigation structures. No one is giving you preferential finances for that or concessional finances for that, you have to find the finances to protect your country,” the president answered.
However, the journalist challenged that there are other ways to transition Guyana’s economy pointing out that there was a plan to build a hydropower plant while some may say the country has offshore wind potential. She questioned whether there are investments coming to the country to make such transitions.
Doubling
Ali said the country is very committed to transitioning to renewable power and claimed that it is doing it at a pace that is more rapid than anyone else. He said Guyana has also committed to doubling the protected area for biodiversity by the end of next year.
“This is a country committing to double the space, the preservation of biodiversity by the end of 2025. And this is a country that is committed to achieving the 30% by 2030 in relation to the protection of biodiversity before 2030.,” the President said, while questioning why this is not the headline or the subject matter.
He maintained that the country is going to pursue hydropower but said it requires financing. He also said that when the country was looking at hydro persons who consider themselves to be environmentalists objected to this. And he said whether it is wind, solar or hydro, all require capital investment and if it is the private sector it requires a business model that requires returns.
“It is not right for us to examine these options without understanding contextually and in reality what the developing world is faced with. The developing world is faced with high debt burden, they are faced with lack of capital, they are faced with the high cost of financing and then they still have to find money for adaptation and mitigation,” the president said.
Asked by the journalist if Guyana faces too high a cost of capital to invest in things like solar and wind and the president responded in the affirmative.
“I am saying that the developing world is facing an immense challenge to raise capital for all of these things and if you look at a country that is transitioning. We said that we are going to build two power plants with natural gas, that is a transition, that is reducing the carbon footprint from petroleum products to natural gas,” the President expounded.
Notwithstanding what he told the NYT reporter, Ali’s government has been hammered for not moving quickly enough on green energy such as solar. The actual investment in solar farms has been a fraction of other major investments. In the meanwhile, the government has invested in a heavy fuel oil power ship and is in the market for similar generators to cope with demand. The government also doesn’t have a capital problem as its annual revenue take from oil is now over US$1b per annum and growing. Critics say it is merely a question of priorities.
The journalist also pointed out that Guyana’s own citizens have been very critical of the deal that Guyana has made with the ExxonMobil-led consortium of oil companies. Citizens, she said, have also criticized the Environmental Protection Agency (EPA) for not carrying out sufficient environmental assessments among other issues such as Guyanese taxpayers being left liable in case of oil spills as a result of the liability insurance the oil companies are allowed to carry. She referred to the High Court ruling where Justice Sandil Kissoon found that the EPA was derelict and pliant and that its decisions put the citizens and environment in peril. She then asked the President how would he respond.
Beautiful
Ali began by saying that “democracy is a beautiful thing and I will continue to ensure that those citizens and everyone has the right to say what they have to say”.
“But let us look at the facts, yes citizens say that. You are talking to a leader of a country that by policy has determined that we are going to keep our forest intact. A forest the size of England and Scotland, with the lowest deforestation in the world. We have kept that intact and we are continuing to keep that intact. You are talking to a leader of a country that is saying to you that by policy we are going to double or area of biodiversity by the end of next year and we are going to achieve the 30% long before 2030,” the President said.
But the journalist countered that his answer did not address the issue about the oil pact. However, the President maintained otherwise adding that the reality is that by policy design the country is keeping the forest intact which is important for the planet.
He said that his government inherited the oil agreement and as leaders they have to consider sanctity of contracts and questioned whether he could just abandon the contract because then “right on this stage you will say there is a tyrant and dictator in Guyana who does not respect contracts. Who does not respect the sanctity of contracts. And then you might hear that Guyana will be called before every commission globally”.
He said his government is focusing on how it can maximise the provisions of the inherited oil contract to the benefit of the country and environment.
“You have inherited this deal, was it a bad deal?” questioned the journalist.
“I have said it a number of times, they had the better hand of the deal,” the president responded.
“Okay, is there any universe in which you would renegotiate this deal or is that off the table?” the journalist then asked.
‘So, we have said all future PSAs (Production Sharing Agreements) will be different…all future production sharing agreements will be different. This is now the standard. We have already drafted new PSAs through consultation and expert advice…and if you examine the new PSAs you will see that there are substantially different from the consortium enjoys. And that is the fact…” the President said.
And he said while there is deficit in the human resource capacity of the country, which suffered under colonial rule, his government is ensuring that it buys the best skills, adopts the best practices (and) invest in the training of human resources so the capacity gap is bridged.
Sengupta proffered that Norway is often used as an example of a country that has used its oil wealth to improve its citizens’ wellbeing and standard of living and it is a country that has over 75% taxes on oil extraction. She then asked about Guyana’s tax rate on oil extraction.
Context
“First of all, it is not a direct (comparison), it is a question that must be answered in context. You are talking about a country that is new in oil and gas versus Norway that has decades of oil and gas experience and oil and gas revenue. Norway has decades upon decades of oil and gas revenue that they utilize to make their economy competitive, to diversify their economy, to expand services, to open up opportunities and to create world class citizens, we are now into this so what is our priority?”
What is your tax?” the journalist interrupted.
“Our priority is to do exactly what Norway did. To invest, to ensure our people, every single family, prosperity must come to every single family. We must have world class health care, world class education, world class infrastructure, we must now have the infrastructure that will invest to expand our eco-tourism. We will have to opportunity now to ensure that Guyana is the breadbasket of the Caribbean by investing in farm to market roads, by investing in drainage and irrigation structure, by investing in sea defences. And we get to that point that Norway had the opportunity to get to after decades of revenue earning, earned from the oil and gas sector, when we get to that point then we implement anything Norway implemented and even do it better.”
“What about your taxes,” the journalist again interrupted, even as the audience cheered the President’s response.
“Let me say this,” the President continued, “On the topic or Norway, we have done such an exceptional job at the environment that we are the first country to sign…a bilateral agreement and that was with the Kingdom of Norway for carbon credit and for the safeguarding of our environment for more than 270m US dollars and you have to give us credit because the world has been trying… Let me say this, I know time is running, how can you have an honest discussion on the future of petroleum if you lock the petroleum companies and countries out of that discussion?”
If he had answered the question about taxes, the president would have had to admit that the oil companies pay no tax to this country.
The journalist asked the Head of State about the country’s forests being in the carbon market and selling carbon credits to an oil company and that there have been concerns that the consent of some indigenous peoples have not been given.
In response, Ali said the low carbon development strategy was crafted after consultation with every stakeholder in the country, including every indigenous community.
“So, the strategy is a national strategy that benefitted from national consultation, so it is a country strategy and not a government strategy,” the president said.
“You are saying consent was obtained…clearly?” asked the journalist.
“Yes, clearly” the President responded quickly.
Critics have pointed out that the government needed approval for the carbon credits sale at the level of village councils and did not have this.
Several questions later the President returned to this issue adding that persons not being in favour of the strategy is democracy which means that not “everybody is going to agree on everything”.
The interviewer pointed out that while Guyana is earning carbon credits at the same time it is producing carbon emission by becoming an oil company and asked the president to respond to the notion that Guyana wants it both ways.
Ali maintained that Guyana has kept its forest alive and forgone a lot of other competing activities, adding that the world would have lost more than 50% of its biodiversity and while Guyana is located in two of the richest biodiversity zones (the Amazon and the Guyana Shield) it is making a commitment to the world.
“Not only are we keeping the forest alive but we are also going to keep this biodiversity while (in) the rest of the world we have lost more than fifty percent. Here is a small developing country that came out of colonial rule, that is making a global commitment that…regardless of the development trajectory of the country we are going to keep that forest, keep that biodiversity so we are going to make a meaningful contribution in the clime equation,” the President said.
According to the President, Guyana is below sea level and as such understands the effects of climate change more than most as it is in a vulnerable region to climate events. He questioned where would the country find the resources for mitigation adaptation since “no one is coming with a grant to give these countries to invest in adaptation and mitigation, you have to pay at market rate, you have to find the resources”.
The New York Times correspondent then questioned whether the President sees no contradiction between selling carbon credits for the country’s forest and producing new carbon dioxide.
“There is no hypocrisy or contradiction in our development path…” the President answered adding that the Government has said that the subsidies from global petroleum countries should be removed.
The President also spoke about what he described as Guyana’s “positive contribution to climate change and keeping the planet alive” which he said is the real story of the country. He stated that the forest covers 86% of Guyana and it is the second tropical largest in the world and one that has the least deforestation.
“Our development is in accordance with the low carbon development strategy and in the low carbon development strategy we believe that we can deploy the forest to earn important revenue through the carbon credit market that can help to uplift the lives of people in the country. Especially the indigenous people within forested community,” he said.
