Future positive as Guyana discovers oil reserves but fears country not ready.

The United States Geological Survey ranks Guyana-Suriname as the world’s second-most prospective, underexplored offshore basin, with an estimated 13.6B bbl of oil and 32 tcf of natural gas yet to be discovered. In May 2015, ExxonMobil announced it made a significant oil discovery with the Liza-1 exploration well on the Stabroek block about 120 mi (193 km) offshore in the Guyana basin.  As of March 30, 2017 Exxon confirmed positive results of a 4th well offshore Guyana on the Stabroek Block bringing the total discovered reserves to around 1.4 billion oil equivalent barrels. Pumping should begin in 2020 with full blown production starting around 2023.

The Guyanese economy is at a critical time in its own industrial development given the burgeoning of its hydrocarbon sector. Analyst says that the discovery helps solidify the area offshore Guyana as an “exploration province” for at least the next fifty years and in light of Guyana’s small population (approximately 752,000), crude could make the country one of the world’s biggest oil producers on a per-capita basis.

Amidst the exuberance, some note that the Country is not ready for such influx of revenue and Guyana must be careful as not to negatively impact its economy In a country with no history of managing complex large scale industries except sugar and bauxite, the size and potential quick development timeline has civil society focused on the ways in which oil could boost the country’s economy or put it at risk.  If it is to successfully extract oil, Guyana needs to build the institutions and capacity to take advantage of the opportunity the discovery could provide.

The government faces a steep learning curve. Beyond fiscal revenues, Guyanese officials have to take advantage of the skills and technology associated with the complex oil space to build a more robust technocratic private sector and empower a new generation of highly skilled technocrats. Alongside the optimism that the oil discovery will be a major driver of the country’s development, Guyanese civil society are also acutely aware of the risks associated transitioning to oil production, particularly in a country already facing challenges with respect to measures of government effectiveness, rule of law, control of corruption, transparency and other governance indicators. One particular concern was how the oil sector could impact the country’s green growth agendaIt is critical that civil society organizations across Guyana to build a critical mass of citizen understanding so they become part of the solution to how Guyana can take decisions which harness the resource for sustained prosperity.

Challenges:

  1. Guyana is an emerging oil producer.  But country has no experience in oil production.
  2. The private sector is generally small and focused on agro-food processing, construction, retail  and distribution.   Little expertise in chemical manufacturing, undersea welding, fabrication, etc. and will likely face challenges in supplying local content to the sector in the foreseeable future.
  3. The country has a history of exporting skilled labor.
  4. The prospective oil production will occur at an  ultra-deep offshore site that requires a high level of sophisticated technology and skilled labor unavailable in Guyana.
  5. Country has weak institutional capacity especially environmental monitoring and enforcement.

Benefits:

  1. Significant revenue earner for central government.
  2. Significant generator of hard currency.
  3. Opportunity to learn from others mistakes and do it right.   Generous assistance is being offered by a number of governments—US, UK, Canada, Mexico, Norway and international organizations like the Inter-American Development Bank, Commonwealth Secretariat, World Bank and EITI.

 The immediate tasks of citizens and civil society is to

  1.  Advocate for a comprehensive energy policy, an adequate regulatory regime,  and a level playing field in terms of incentives and rules of the game.
  2.  Advocate of local content legislation.
  3. Advocate for rapid institutional strengthening and transparency.
  4.  Influence Government policies on human capital development for the sector.
  5.  Advocate for Sovereign Wealth Fund and clear allocation rules and a commitment to fight Dutch Disease.

Guyana is blessed.   Much needs to be done to assure broad distribution of benefits and resulting dynamism of this resource windfall. 

TRUTH, LIES AND CORRUPTION

Corruption has a long history dating back to the 14th century. The Latin etymology of the word corruptus means to “destroy” or “spoil” but the truth is that the earliest Book of the holy bible, Genesis chapter 6 verse 12 similarly describes a world before the flood where ‘everyone on earth was corrupt‘ (New Living Translation of the Holy Bible). Genesis 6:12 describes a world filled with structural violence and in the absence of any well-regulated government it is easy to imagine what evils would arise. The influential, rich, powerful and connected did what was right in their own eyes, and having no fear of God, destruction and misery are in their ways.

The Mechanics of Corruption

To understand the mechanics of corruption, you have to pay attention to the extensive conflicts of interest, intricate web of connections, widespread clientelism – where goods or services are exchanged for political support – and the intimate relationships between wealth accumulation and politics are the distinctive features of corruption. And they are all too common in the political world.

Corruption arises from institutional attributes of the state and societal attitudes toward formal political processes. Institutional attributes that encourage corruption include the wide authority of the state, which offers significant opportunities for corruption; minimal accountability, which reduces the cost of corrupt behavior; and perverse incentives in government procurement and contracting, which induce self-serving rather than public-serving behavior. Societal attitudes fostering corruption include allegiance to personal loyalties over objective rules, low legitimacy of government, and dominance of a political party or ruling elite over political and economic processes.

Rolling Back the Lies and Corruption

Possible responses to these underlying causes of corruption in Guyana include institutional reforms to limit authority, improve accountability, and realign incentives, as well as societal reforms to change attitudes and mobilize political will for sustained anti-corruption interventions. A strategy must be tailored to fit the particular circumstances of this country, the Government needs to design a strategy that requires assessing the level, forms, and causes of corruption for Guyana as a whole and for specific government institutions.  In particular, strategy formulation requires taking a hard look at the level of political will for anti-corruption reform in government and civil society.  Corruption in state agencies does not exist in isolation. To some extent, it is a manifestation of the prevailing ethical standards in the public sector. If ruling politicians and senior civil servants, who are supposed to uphold integrity in the public sector, are seen to be corrupt, if public office is generally viewed as an asset to be exploited for personal benefit, if public servants have no compunctions about flaunting ill-gotten wealth, it becomes very difficult for officers to remain immune to the lure of illicit enrichment.

Opportunities for reform must stem from reformists’ tendencies within the government, public outrage over scandals or an opposition movement.  Civil society must take the lead and focus on societal measures to increase awareness of the problem and develop a constituency for reform.  The real issue which needs to be addressed, however, is the environment within Guyana which permits public officials to stray so far from their mission in the first instance. It starts at the top. If people in the society or within the public sector don’t have confidence in or respect for the politicians or executives managing the government, it’s going to be reflected within the ministries and agencies.

I would therefore encourage the government to seriously consider aligning the anti-corruption agenda to national initiatives such as a National Anti-Corruption Policy (NACP) as an explicit national integrity agenda that would emerge with commitment to succeed, shared jointly by civil society, the private sector community and the government.

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