Published: October 7, 2016
GEORGETOWN, Guyana, Oct 7, CMC – The Guyana government says it has been assured the country will benefit economically from its newly discovered oil and gas sector despite current market trends of low prices for the commodities.
In a statement, the Ministry of Natural Resources said it has taken note of the perspectives and opinions expressed by members of the public on how the country should be preparing for the oil and gas sector. It said while it welcomes healthy discourse and remains committed to continuing these conversations in an inclusive and consultative manner,” however, we also recognize that there is need for accurate information and wish to take this opportunity to provide such and also remind the public of the progress being made by the Ministry in preparing the nation for oil production”.
In July, the US-based Exxon Mobil Corporation said it made a significant discovery of oil in a second well, located offshore Guyana. According to Exxon, that drilling results from the Liza-2 well, the second exploration well in the Stabroek block confirm a world-class discovery with a recoverable resource of between US$800 million and 1.4 billion oil-equivalent barrels.
“We are excited by the results of a production test of the Liza-2 well, which confirms the presence of high-quality oil from the same high-porosity sandstone reservoirs that we saw in the Liza-1 well completed in 2015,” Steve Greenlee, president of Exxon Mobil Exploration Company said then. The government said that international financial experts have assured that despite current market trends, Guyana will benefit when production commences, provided that the operations of the well perform as projected.
“They have also assured that no international company will sanction a project if the break-even price is higher than its forecast noting that large oil companies are especially well known for having very low price forecasts before they pour their resources into a project. “Further, the experts have assured that despite the push for renewable sources of energy, oil demand – now at 94.1 million barrels per day worldwide – is still very high and growing.”
The David Granger administration noted that the 2015 OPEC World Oil Outlook (WOO) indicates that global energy demand is set to increase by almost 50 per cent in the period to 2040, with the overall energy mix continuing to be led by fossil fuels at almost 78 per cent. “Combined, oil and gas are expected to supply around 53 per cent of the global energy demand by 2040. Medium term oil demand is revised upward, compared to the WOO 2014, rising above 97 million barrels a day (mb/d) by 2020; Oil demand is projected to be at 110 mb/d by 2040.
“While we recognize that the oil industry is fraught with uncertainty, we do believe that industry experts’ projections can serve as a guide as to where the industry is headed over the medium and long term. “In Guyana’s case, while there are many variables that may affect production and the revenue that the country might earn through production sharing, taxes and other arrangements, we would be doing ourselves a disservice if we do not do everything possible well in advance to prepare for oil and gas production,” the Ministry of Natural resources said.
It said that to this end, the government “is in an accelerated process of development and capacity building to prepare for this new economic reality. “The approach has included building and reinforcing legislative, financial and institutional capacity, drafting plans for the short, medium and long term as well as developing a robust communications strategy to keep all stakeholders informed of developments. Permit us to share some of our achievements to date”.
Georgetown said it would soon be signing a Memorandum of Understanding (MOU) with its oil-rich Caribbean Community (CARICOM) partner, Trinidad and Tobago for technical support and cooperation in the area of oil and gas. “There is also a visit scheduled to Trinidad and Tobago to further the cooperation with a view to preparing Guyana for the oil and gas industry. This cooperation includes exchange visits between the two Caribbean countries and the offering of scholarships.
“Scholarship opportunities are also being pursued through several engagements with the Mexican Petroleum Institute (IMP) while support in capacity building was received from the University of Calgary and the Government of Canada for the development of a Sovereign Wealth Fund. The United Nations Development Programme (UNDP) has also provided support to bring regional and international experts together for discussions and knowledge sharing,” the government said. It said with the support of external expertise, the Ministry is actively working on creating a Local Content Policy to guide participation of local services and skills in the sector.
“The Government of Guyana is also receiving support from the Commonwealth to prepare legislation for the oil and gas sector. In the coming months, the Minister of Natural Resources is expected to table eight pieces of legislation all connected to the oil and gas sector and which are necessary for the establishment and strengthening of the regulatory and fiscal policy frameworks.”
The government said that it is seeking to ensure transparency within the oil and gas sector and is “taking the lead in ensuring Guyana signs on to the Extractive Industries Transparency Initiative (EITI) with a view to ensuring that there is transparency in the sector when the revenues from oil are received, as well as that of other extractive sectors”.