Live Book Launch
YouTube
Tuesday February 1, 2022
2pmEST/7pmGMT
https://youtu.be/W16jk0BdSZY
Panelists: Professor Anthony Bryan, Sanjeev Datadin MP, Dr. Tulsi Dyal Singh, Professor Terrence Blackman, and GHK Lall.
Guyana Business Journal & Caribbean Policy Consortium hold webinar on new study: “Strategic Considerations for Local Content Requirements in Guyana’s Oil Sector” by Dr. Jerry Haar
Significant Research Findings:
Guyana’s dynamic and rapidly progressing oil and gas development can create boundless opportunities, which is the intent of local content policy (LCP). However, there has been an information vacuum related to the LCP—its rationale, structure, and pathway to implementation. Fortunately, the government of Guyana has addressed this shortcoming and produced a draft Local Content Policy. While the document has produced a reasonable policy framework, the LCP is jeopardized by a rigid compendium of local content targets that are questionable in their derivation or may be exceedingly difficult to attain.
It is urgent, therefore, that the government address and remedy the shortcomings of its LCP. After all there are many positive features of the LCP including: preferred access and opportunities for Guyanese; the need for good governance for the LCP to succeed; the need for appropriate legislative support for successful policy implementation; and engagement of the Guyanese diaspora as a vitally important resource.
Panelists:
Dr. Jerry Haar, Professor of International Business, Florida International University
Dr. Anthony Bryan, University of the West Indies & Caribbean Policy Consortium
Dr. Terrence Blackman, Medgar Evers College, City University of New York & Guyana Business Journal
Dr. David Lewis, Caribbean Policy Consortium & Manchester Trade Ltd. Inc. (Moderator)
Key Quotes:
- “I have great faith in the capacity of Guyanese to meet this challenge. What worries me is if Guyanese institutions aren’t able to fully hold to the path that is necessary in order to do this. I hope that these opportunities will be strengthened.” – Dr. Terrence Blackman
- “We know that the government’s goal is maximum quality and benefit of participation in the petroleum sector value chain by Guyanese. We see real positives in terms of preferred access and opportunities for Guyanese, in the emphasis on good governance, the appropriate legislative support for successful policy implementation and the engagement of the Guyanese diaspora community.”– Dr. Jerry Haar
- “[But] there is an extensive and rigid compendium of local content targets that are questionable in their derivation and exceedingly difficult to attain. In essence we believe that these targets may be pose a strong disincentive for potential foreign investors beyond the extractive industry of oil and gas.”– Dr. Jerry Haar
- “We are concerned that a number of these content requirements [were] derived excessively from the LCPs of other oil-producing nations. Any model developed has to be based upon Guyanese reality and this assessment and projected numerical targets need to be done through an independent party.”– Dr. Jerry Haar
- “The private sector—local and foreign—along with the public sector should be working closely together to assist local firms in meeting the technical requirements for oil services and equipment.” – Dr. Jerry Haar
- “We are not going to be able to function effectively as a society as a small oligarchy and this is where I think these institutions like UoG and others have a role to play. And this is one place where I must commend the current government.” – Dr. Terrence Blackman
Those interested can view the full study at here or https://cpccaribbean.org/.
Friday, November 19, 2021, 10:30am-11:30am EST
STRATEGIC CONSIDERATIONS FOR LOCAL CONTENT REQUIREMENTS IN GUYANA’S OIL SECTOR
Presenter
Dr. Jerry Haar, Department of Business, Florida International University.
Panelists
Dr. Anthony Bryan, UWI & CPC
Dr. Terrence Blackman, MEC & GBJ
Moderator
Dr. David Lewis, CPC & Manchester Trade Ltd. Inc.
Local Content Requirements
Guyana’s dynamic and rapidly progressing oil and gas development can create boundless opportunities for all. This is the intent of local content policy (LCP). This webinar explores the challenges and opportunities of meeting the goal of Guyana’s local content policy to “maximize the level, quality, and benefits of participation in the petroleum sector value chain by Guyanese.”
We discuss the local content policy, its rationale, structure, and pathway for implementation.
Streaming Links
Youtube: https://tinyurl.com/tjf69vm3
LinkedIn: https://tinyurl.com/2cdaw7ve
Facebook: https://tinyurl.com/3cyxkuyk
This event is presented by the GUYANA BUSINESS JOURNAL and the CARIBBEAN POLICY CONSORTIUM. CPC and GBJ are dedicated to exploring and understanding the key issues in the Guyanese and Caribbean economy and, to developing concrete policy proposals in support of the region’s socio–economic and political development.
This free event promises to generate a rich discussion on Guyana’s proposed Local Content Requirements. Please join us and extend this invitation to anyone you think would be interested in this critical conversation.
Contact
Terrence Blackman, Guyana Business Journal terrence.blackman@gmail.com
The Guyana Business Journal (GBJ) and the Caribbean Policy Consortium (CPC) have teamed up to provide Guyanese in the diaspora with a series of webinars that will cover Guyana’s LOCAL CONTENT BILL 2021, FIRST SCHEDULE MINIMUM LOCAL CONTENT LEVELS.
Join us for the first session Friday, November 19, 2021, at 10:30 a.m-Noon. ET when we present Dr. Jerry Haar, Professor of International Business Florida International University on STRATEGIC CONSIDERATIONS FOR LOCAL CONTENT REQUIREMENTS IN GUYANA’S OIL SECTOR.
During this webinar, we will explore the challenges and opportunities of meeting the goal of the local content policy to “maximize the level, quality, and benefits of participation in the petroleum sector value chain by Guyanese.” We look forward to you joining us on youtube , https://www.youtube.com/watch?v=JkoHesPFtaI , and on GBJ’s Facebook Live for this critical conversation.
I come from the nigger yard of yesterday
leaping from the oppessors’ hate
and the scorn of myself
I come to the world with scars upon my soul
wounds on my body, fury in my hands
I turn to the histories of men and the lives of peoples.
I examine the shower of sparks the wealth of the dreams.
I am pleased with the glories and sad with the sorrows
rich with the riches, poor with the loss.
From the nigger yard of yesterday I come with my burden.
To the world of to-morrow I turn with my strength.
-Martin Carter
In the capital city of Georgetown, Guyana last year African Guyanese wearing the clothes of their Akan ancestors were beating drums as they approached the statue erected in 1976 to honor Cuffy the leader of the 1763 Berbice Rebellion.
The video of those paying homage to Cuffy and singing in a language that could not be understood was shared on various social media outlets. A good comrade of the writer Ta’Seti said he asked a brother from Nigeria what they were saying and he explained they were singing about freedom in Yoruba. The was a song of honor was passed down by our ancestors and to propitiate the great ancestor Cuffy, an Akan from Ghana, who fought to liberate our ancestors.
On August the 1st people will, once again, descend upon the national park to hear the music of freedom in various forms: most notably calypsos, folk, and reggae. Adorned with African clothes, jewelry and hairstyles we will be seeking to embrace “we ancestors dem” and revel in their achievements. We will honor our people who died fighting against , the over 200 years of enslavement, and the 128 years of so-called flag independence.
It has been 181 years since we have been “emancipated”. However, as Dr. Kimani Nehusi has noted, “up till now many of us are still mentally enslaved”. This is why when we wear African themed clothing at various events before or after Emancipation Day, we will hear some Afro Guyanese folks say, “wha wrong wit you, ya think dis is Emancipation Day”. This cultural insecurity and to a lesser extent cultural shame shows that we still have much work to do in order to see Afro Caribbean folk reflexively embrace African culture. It is clear that we must aggressively disseminating and recreating Afro cultural forms to achieve the organ level of cultural buy in necessary for this cultural dimension to be a tool to be used against the continued cultural genocide that continues to upend the progress of African people throughout the globe.
The challenge for our community is truly “emancipating” ourselves. We need to meaningfully collect, organize, describe, analyze data on the emancipation experience across the Caribbean with a view to prescribing actions for Caribbean people, today, 2019, in furtherance of our genuine emancipation.
I note that the theme of emancipating ourself from mental slavery appears in the work of many Caribbean thinkers. It is clear that for us to successfully do this we must engage this challenge on a number of levels. The late great African/Jamaican Reggae artist Bob Marley once sang in “Redemption Song” “we must liberate ourselves from mental slavery none but ourselves can free our minds.“ One can draw a line from the Redemption Song to Afro Guyanese Historian Walter Rodney’s statement from Groundings with my Brothers, “By what standard of morality can the violence used by a slave to break his chains be considered the same as the violence of a slave master? By what standards can we equate the violence of blacks who have been oppressed, suppressed, depressed and repressed for four centuries with the violence of white fascists. Violence aimed at the recovery of human dignity and at equality cannot be judged by the same yardstick as violence aimed at maintenance of discrimination and oppression.”
As we embark on the Emancipation celebrations in Guyana and all over the Caribbean we must keep in mind what the late John Henrik Clarke once said and that is freedom is not given by our oppressors but rather it is taken by the oppressed. The late Afro-Trinidadian scholar Tony Martin reminds us that so-called humanitarians advocating for the end of enslavement and economic reasons could not have ended the inhumane captivity, as Menes De Griot an African Guyanese cultural artist , describes it without the constant rebellion of Africans in every place in the Americas our ancestors were bound to.
Hence, as we celebrate emancipation from enslavement, captivity, i.e. the Makumbo (great annihilation) on August 1 to commemorate the British “emancipating” Africans in 1834( It only applied to those under the age of 6. Everyone else had to remain as so-called apprentice on plantations and received payment for their work only after having worked more than 6 hours with the exception of Antigua and Bermuda because the enslavers thought it cheaper to pay Africans rather than keep them enslaved) it is wise for us to remember the late Afro-Vincentian Maxwell Haywood who constantly held up the hypocrisy of “emancipation” and reminded us “that at the end of the enslavement period in 1838, the British government awarded the European slavers a £20 million compensation package for freeing the enslaved black population who worked for them for free for hundreds of years. Black people got nothing! This compensation given to the European slavers is a historic and grave injustice, and it is at the heart of the major socio-economic challenges faced by the former enslaved black population. It has been estimated that the £20 million given to those who enslaved black people is worth approximately US $200 billion today.”
This is part of why today we still suffer in a Neo-colonial existence based on the lack of reparations for the children of the enslaved war captives. The latter is how it was described By Walter Rodney as our esteemed elder Eusi Kwayana reminds us. Once we get to the date of August 1, 1838, which is the more excepted date for Emancipation the British began to bring in Indentured laborers from India, Africa, China, Portugal and the Caribbean due to the avaricious planters wanting to depress wages.
In the case of Guyana, Eusi Kwayana writes that the importation of indentured servants was actually financed by taxing African Guyanese, but this also happened throughout the English, French, and Spanish colonized Caribbean according to the late African-Trinidadian Garveyite scholar Tony Martin’s text on Caribbean History (check) to include Haiti as it had to make a huge payment to France to stave off being re-enslaved by the French in 1825.
However, in the case of Guyana, the village movement began and Africans collectively bought land and started to prosper but colonial laws informed by racism, preferential treatment of other groups and malicious sabotage would soon stymie this self-reliant movement, which saw (get data from Kwayana). Most African Guyanese employed the African communal idea of susus in order to save enough money collectively to by lots of land together to live and farm. This is long before the ideas of Karl Marx came into being.
Dr. Nehusi posits in A People’s Political History of Guyana 1838-1964, “Afrikan Guyanese were …first Guyanese to begin planting rice, founders of the village movement, retail trade, of the gold and diamond industry and of homesteading along the banks of rivers and creeks”
Preceding Emancipation were many revolts throughout the Caribbean against enslavement by Africans were raged and fought for self-emancipation in the form of Afrikan maroonage in places like Hispaniola in 1502, St. John 1733 -1734, Saint Vincent, Dominican Republic, Suriname, in the 16th century St. Kitts, Barbadoes, Guadeloupe, Antigua, Tacky rebellion Jamaica 1736, Cuffy Berbice Rebellion Guyana 1763, Mackandal Haiti 1758, 1791- 1804 Haitian Revolution Rebellion, Sandy Trinidad 1770, Quamina a Cormantee in Demerara, Guyana 1823, or the Rebellion in Pointe A- Pierre Trinidad 1832, Damon led a passive peaceful vigil on August 2, 1834 in Essequibo Guyana that caused him to be hung because he unfurled a flag and it was said to be illegal and too rebellious.
Forty revolts would occur from 1794 to 1834 all across the Caribbean. Many were put down in extremely inhumane and brutal fashion by Europeans. Even the women rebelling in various cases were shown no mercy and brutally murdered and also sexually assaulted for fighting for Emancipation since in some cases they were seen to be more troublesome than their male counterparts
There were also countless rebellions to achieve the full prospects of freedom as Emancipation was a farce in many cases after 1838 Martin describes many revolts by Africans to have their rights honored as in some cases their housing, livestock and provision farms were destroyed by Europeans who did not want them to have automony to govern themselves and many even had councils set up to govern their respective villages, lodges, and political organizations.
Afrikan Guyanese scholar Dr. Nehusi writes about Afrikan Guyanese creating the British Guinea African Association in 1842 to represent the interest of Afrikan and mixed race Guyanese in the face of the White plantocracies oppression. As Dr. Nehusi writes the mistreatment of our ancestors meant that they received a partial freedom at this time. (cite Martin, Kwayana, Nehusi).
Trinidad and Tobago had countless rebellions to achieve and expand the emancipation franchise and some of this helped to erect and was incorporated in the carnival and J’ouvert celebrations. As they to stuggled (cite martin)
Rebellions inspired each other and this would influence revolts in America as evidenced by a recent report on NY1 of an 1855 celebration of 5000 Africans in America at the Stapleton U.A.M.E church Staten Island. The Emancipation Proclamation signed by then President Lincoln in 1863 would only free those in states not in rebellion against the union like the border states.
The Afrikan participation in the Civil War and the passing of the 13, 14 and 15 amendments culminate the end of the war. Leading up to this would be the Gabriel Prosser 1800, Denmark Vesey 1822, Nat Turner 1831, John Brown’s raid in 1859 and in all cases revolts included the usage of African religious practices a form of cultural resistance in forms of Vodum, Yoruba practices, Obeah and even Christianity which they sometimes used to disguise their Afrikan religious practices and many have argued that all these battles against enslavement/captivity in many ways motivated others to come. Thus, this is one of the major reasons why learning to read was made illegal during enslavement.
As Walter Rodney once wrote and Kimani Nehusi emphazided in his work the humanizing of the Guyana water ways “entailed the moving of at least 100 million tons of soil of mud … slaves [enslaved Africans] moved 100 million tons of heavy, water – logged clay with shovel in hand” during the period of the ritualized barbarism known as chattel plantation enslavement.
Hence, during Emancipation celebrations we reflect on the path blazed by our ancestors who should be venerated and propitiated through the practice of Libation on August 1. We must build a curriculum to mandate that all children going to school in Caribbean learn about the movements toward emancipation all year. It is our history and culture and we must teach our children the truth so they can redefine themselves and build a Trinidadian, a Guyanese, a Jamaican, a Barbadian, an Antiguan culture that seamlessly integrates and affirms our Akan, Congolese, Yoruba, Igbo, Mandingos, Fulani, Golas from Angola, Krus, Fulani Ewes, Fons, ancestors.
You come in warships terrible with death
I know your hands are red with Korean blood
I know your finger trembles on a trigger
And yet I curse you — Stranger khaki clad
British soldier, man in khaki
Careful how you walk
My dead ancestor Accabreh
Is groaning in his grave
At night he wakes and watches
With fire in his eyes
Because you march upon his breast
And stamp upon his heart.
Although you come in thousands from the sea
Although you walk like locusts in the streets
Although you point your gun straight at my heart
I clench my fist above my head: I sing my song of freedom
-Martin Carter
[wpvideo sAxBKwix]
Vishal Mangalwandi, above, speaks eloquently to the manner in which corruption retards societal development. The corruption perceptions index ranks 180 countries and territories by their perceived levels of public sector corruption according to experts and business people. It uses a scale of 0 to 100, where 0 is highly corrupt and 100 is very clean. More than two-thirds of countries scored below 50 on this year’s CPI. The average score was just 43. These data reveal that the continuing failure of most countries to control corruption is contributing to a crisis in democracy around the world. While there are exceptions, the data shows that despite some progress, most countries are failing to make serious inroads against corruption. Guyana is no exception in this regard. It has made some incremental progress but Guyana’s rank is 93 / 180 and its score is 37 / 100.
In Guyana, economic hardship, institutional weaknesses, criminal justice inefficiencies, as well as racial fractures in society provide fertile grounds for corruption. Although there is little data and research available on the country’s state of governance and on corruption, all major governance indicators suggest high and deteriorating levels of perceived corruption in the country and the prevalence of both bureaucratic and political forms of corruption.1
We Guyanese are well aware that our country has been fractured by decades of corruption. The “runnings” culture has now almost completely overwhelmed every sector of our society. However, recent oil and gas discoveries offer the prospects of significant wealth to Guyanese people and an opportunity to chart a new course. Most recently, the 11th and 12th wells announced last week takes our potential petroleum resources to over 5 billion barrels of oil equivalent, most of it oil. Production could exceed 1 million b/d next decade, putting Guyana in non-OPEC’s top ten. ExxonMobil’s plan for the Liza complex will fundamentally transform our economy.2 We must guard against this wealth falling into the hands of those who have, in the past, amassed significant wealth through corrupt practices. We must demand, moving forward, a laserlike focus on greater accountability and transparency.
Corruption is “the abuse of entrusted power for private gain.” This abuse of entrusted power can occur at various levels of society, but arguably, the most damaging, is grand corruption, where wilful acts, committed at high levels of government. These acts fracture the functioning of the state and in turn, result in the impoverishment of the society as a whole.
As a bone fracture requires assessment before treatment so too does the societal fractures created by the impact of corruption. As qualified medical professionals would attest there are several types of bone fractures that are difficult to repair and the explanations as to why vary for each. Guyana’s corrupt practices has created societal fractures that bear all of the hallmarks of complex and difficult to repair fractures. It is evident that corruption cannot be allowed to go unpunished and unchecked if these fractures are to have any chance of healing.
Repairing a complex fracture requires a systematic approach and this is no different when tackling the societal fractures which emanate from corupt practices. It is no secret, Guyanese, at home, and abroad are aware that, over the last quarter of a century, corruption has become and integral part of Guyanese life. These corrupt practices have not only affected our education, health, agricultural and housing sectors, but, significantly, they have transformed, and not for the better, the Guyanese people and our culture. Can it be repaired? How is all of this repaired? What is a realistic time frame in which we can expect to see results? Well, just like with a complex bone fracture, after its evaluation comes the determination of ‘a coherent system of treatment’. This is no different than addressing corruption which thrives in an environment where the systems are weak. Implementing strong systems takes time and in many instances attracts resistance. But just like the treatment of a complex fracture the aim is not to subject the individual to pain and discomfort although this may be inevitable, the aim is to ensure that the fracture heals. In the last three plus years it has been widely reported that there have been numerous systematic changes in parastatal agencies in Guyana. These changes have not always been received favourably by certain sections of the society as it is considered that such changes deeply affect the already severely marginalised. No doubt this may be true but, just like the treatment of a complex fracture, focus must be placed on the long-term benefits such changes make to society and the fight against corruption. Coherent systems are a necessary treatment in the fight against corruption however in a society like Guyana where there are groups of people that have been marginalised for over two decades, there has to be consideration given to how this imbalance can be redressed in an equitable manner.
With the prospects of oil on the horizon we will be doing ourselves a disservice if we were to forgo the notion of accountability for pasts acts of corruption and its associated spoils. We must ask ourself this question: what do we want for our children? A society that is based on restored values of accountability, collective responsibility, dignity, fairness, honesty and humanity or one where ‘money is circulating’ and there is little concern from where this money comes or at whose expense?
Guyana has a bright future, but the road to that bright future is bumpy. Like the complex fracture there is no quick fix. If a blind eye is turned to the corruption witnessed in the past, perpetrators of such acts will imagine that this type of behaviour can be repeated with impunity in the future. We must aim to give birth to a society in which we are judged, fairly and justly, for the consequences of our actions. The academic literature is clear: corruption acts as a major deterrent to growth and development in a society.3 The future is one that requires us not to forget the past. The next generation is relying on us to give birth to the new Guyana and we must make it our duty not to deprive them of the bright future they have ahead.
In this week’s installment from the GBJ we address the question of revenues from the impending oil production. In an earlier post we noted that the main direct effect of the oil sector on the domestic Guyanese economy will be through the addition of revenue in the GOG’s treasury. We pointed out then that under the revenue sharing agreement, seventy five (75) percent of oil production will be initially allocated to “cost recovery” to ExxonMobil and its partners. The remaining twenty five (25) percent will be considered “profit oil” and this will be shared 50-50 with the GOG. The revenue sharing agreement sets a royalty of two (2) percent on gross earnings, which brings the initial GOG share to 14.5 percent, i.e one half of the 25% designated “profit oil” plus another 2% of the “profit oil” for royalties, of total oil revenues.
One of our GBJ readers, Lancelot King of Georgetown Guyana, questioned the accuracy of our first formula. Specifically Lancelot questioned whether or not the 2% royalty was computed on the “profit oil”. A bit of research revealed that this was indeed a GBJ error. However, it is true that “Stabroek’s fiscal regime is relatively straightforward. The key revenue stream for the government is a 50% split of profit petroleum, which is derived after costs have been recovered, up to a ceiling of 75% per year of turnover, and a royalty of 2% has been subtracted”.
So let’s try to explain this, in the simplest of ways, once more. We once again thank Lancelot King for pointing this out to us. It does matter on which amount we compute the 2% royalty. Suppose, on say June 22, 2020, the very first day of production, the well, produces 100,000 barrels of oil, and let’s suppose further that the cost of oil on June 22nd is $55 per barrel, how much money will the GOG receive? If we sell 100,000 barrels at $55 per barrel we, EXXON and GOG, will receive $5,500,000 in total revenues. The GOG derives monies from two streams: (i) Royalties; and (2) The 50-50 split of “Profit Oil”.
Let’s first compute the royalty payment. The royalty payment is addressed in Article 15.6 of the 2016 Petroleum Agreement. It says, “
Royalty = 2% of all Petroleum sold, i.e., 2% of $5,500,000 = $110,000. This leave us with $5,390,000. Until Exxon’s exploration and setup expenses are recouped, Article 11.4 of the 2016 Petroleum Agreement specifies that up to 75% of these monies go to “cost recvovery”. 
I.e., 75% of $5,390,000 = $4,042,500 is allocated to Exxon for “cost recovery”. This leaves us with $1,347, 500 which is designated “profit oil”. This amount, as stipulated in Article 11.4 of the 2016 Petroleum Agreement:
is divided 50-50 by Exxon and the GOG. So the GOG will receive $673,750 from the “Profit Oil”. In total GOG will collect from the $5,500,000, $673,750 from “Profit Oil” and $110,000 in royalties = $783,750.
It is important to understand that the GOG’s share, while initially small will increase substantially once cost recovery on the initial investment is met. The graph below gives a sense of current estimates of the growth and decline of GOG revenues over the life of the field. 
Exonn’s cost recovery will be met by the late 2020s and from that point onwards almost all of the production will consist of “Profit Oil.” Even under the most conservative assumptions Guyana will be transformed. Baring unforseen circumstances GOG revenues are likely to hit a billion dollars a year by 2024. It is estimated that the field will be viable through 2040.
Yes, it is true that ours is not the best deal. The research demonstrates that ours is perhaps the least competitive of recent agreements of this type. See below for a comparison of the Guyanese deal to others with similar features signed recently. 
Having said this, this is where we are, it is a better place than most and it is up to us to write the ending of this story. We are, conservatively, very likely to receive, over the course of the life of this field $8 billion. This is as good a start as we can ask for. We have a chance to jump the gap, let’s be smart and get this done.
A small English-speaking nation located on the northern coast of the continent of South America, Guyana is said to be on the cusp of wealth based on the discovery of oil and natural gas in the country’s seabed where experts estimate 1.4 billion barrels of oil reside. Experts also predict that the oil discovery and subsequent production, earmarked to begin in 2020, will create unprecedented external investment interests and opportunities. But opportunities for whom? Perhaps the broader question we should ponder too is how might oil wealth present an opportunity for the country to confront and rewrite the grand narrative that the international community is all too familiar with? I daresay that narrative is only one side of the nation’s story-Poverty, historical ethnic political tensions and the infamous Jim Jones mass suicide tragedy.
Interestingly, these three pillars are not diametrically opposed, but represent fruits from the seed of resource exploitation initiated by European colonists whose resort to enslaved and indentured laborers from the African continent and India respectively, facilitated the development of a massive haven called Guyana. Poverty is somewhat situated in the socioeconomic and political model adapted by leaders within a post-colonial context in which racial tensions are implicated. The Jim Jones saga bears both geopolitical and economic contours which I shall leave for my learned colleagues to explicate.
Like many Guyanese both at home and in the Diaspora, I’ve asked myself repeatedly how can a country measuring merely 83,000 square miles with a population of less than a million people possess such wealth yet be classified as poor. By whose standards? Moreover, why have we been hearing about the country’s potential for years without realizing the fulfilment of such potential? My questions are premised on the fact that Guyana’s economy is built upon agricultural production and natural resource extraction that have yielded significant revenue based on export earnings over the decades. Rice and sugar production have served as the nation’s mainstay for years, along with other crops that have combined to earn the country the coveted title of breadbasket of the Caribbean some decades ago. Yet we are classified as poor!
While bauxite, gold and diamond also formed part of the country’s extractive wealth for years, the country has experienced shifting fortunes based on global price setting and demands. However, gold production has remained constant for the country’s mineral and mining industry, despite the bitter sweet trials the sugar industry has suffered based on the institution of austere trade arrangements by Britain that once guaranteed its former colony preferential treatment. Nonetheless, there has been a resurgence of foreign interests in the exploitation of bauxite primarily by Russian and Chinese mining establishments. A tsunami is also fast approaching to sweep up every possible opportunity to conduct business in Guyana based on the oil sector. There is already a flood of investors, from various continents, who have made it their business to explore investments in shares within the oil sector while others are eyeing the potential for trade with Guyana. But what are we doing as Guyanese? Should we remain on the sidelines?
This is not the time for any enterprising Guyanese to sit by and contemplate wealth while investors move beyond contemplation to action. Guyana’s black gold signals the awakening of hope for the country to arise from the ashes and label of poverty and underdevelopment. Moreover, rescripting Guyana’s story need not have plot twists situated in the African experience where oil wealth has not redounded to economic prosperity for citizens as seen specifically in Nigeria, West Africa, where poverty is pervasive in the most populous West African country. Civil unrest and political complicity in corrupt practices also mar the country’s progress.
Even closer to home, Guyana’s story does not have to reflect Trinidad and Tobago’s reality. Ours can evolve for the world to marvel based on prudent political and economic stewardship of the country’s newly discovered wealth for the people of Guyana. Such stewardship can benefit from the expertise of Guyanese at home and the Diaspora, including those who fled for economic and other reasons and are willing, ready and committed to co-laboring with citizens in defining the business opportunities resonant across both traditional and non-traditional sectors and new business frontiers.
It is time for everyone to be apprised of the prospects, implications and national economic trajectory that will translate to human development and an improved standard of living for all Guyanese. The business of national development must also include the establishment of economic and marketing training initiatives to create sustainable business literacy among citizens beyond oil. At the same time, it is incumbent upon the state to discern and protect itself from prospects of external reframing of our new narrative in a manner that presents the world with a paradoxical outlook-Poor Oil Nation. My optimistic outlook tells me that we can only get better as a nation, and as a people, with the caveat that we seize every conceivable opportunity for home grown wealth in a future with oil.
Image courtesy of Dock Media Group & GCCI
In this week’s installment of the GBJ, we take a look in the mirror. We believe that the initial conditions matter, and that it is important for us to document and disseminate with clarity and precision, what we have inherited and where we are at a particular moment. In this vein, for the next few weeks we will unpack the IMF 2018 Article IV Consultation-Press Release and Staff Report. This report was published in July 16, 2018.
It argues, in summary, that Guyanese economic growth slowed and became more broad-based in 2017. Real GDP growth in 2017 was 2.1 percent. The non-mining GDP however rebounded from its contraction in 2016 and our external balance, the money Guyana brings in from its exports minus the money it spends on imports, turned negative due to weaker than expected export growth ( we have to sell more of our goods and services abroad) and higher oil prices. Inflation, i.e., the rate at which the average price of a basket of selected goods and services in the Guyanese economy has increased over time, remains relatively low, and GOG’s monetary stance is accommodative. I.e., the Central Bank has acted to expand the overall money supply to boost the economy as growth has slowed. A key economic marker on Guyana’s economic timeline is the expected commencement of oil production in 2020. This commencement of oil production and the additional oil discoveries have significantly improved the medium- and long-term Guyanese economic outlook. Guyana, broadly speaking, is a good place to make a long term bet on today!
Our local context: In 2015, ExxonMobil made a significant offshore oil discovery in Guyana. The field is conservatively estimated to hold between 800 and 1,400 million barrels. Following additional discoveries in 2017-18, recoverable resources are now conservatively estimated at around 3.2 billion barrels of oil. Commercial production is scheduled to begin in early-2020, with an output estimated at 100,000 barrels/day (bpd), rising to 300,000 bpd in 2025. Some recent estimates have production as high as 120,000 bpd in 2020 (Liza I) and rising to 340,000 bpd in 2025 (Liza I and Liza II combined). The graphic below shows estimated oil production in thousands of barrels per day, left vertical axis, and GOG oil revenue in billions of Guyana Dollars on the right vertical axis over the years 2020 through 2038.
The main direct effect of the oil sector on the domestic Guyanese economy will be through revenue in the GOG’s treasury. Under the revenue sharing agreement, seventy five (75) percent of oil production is initially allocated to “cost recovery” to ExxonMobil and its partners. The remaining 25 percent is considered “profit oil” and is shared 50-50 with the GOG. The agreement sets a royalty of 2 percent on gross earnings, which brings the initial GOG share to 14.5 percent of total oil revenues. The GOG’s share will increase substantially once “cost recovery” on the initial investment is met (in the late 2020s), and most of production consists of “profit oil.”
Evidently, these discoveries will provide Guyana with much needed and welcomed additional financial revenues for growth-supportive investments and social expenditure, as well as financial buffers against adverse economic shocks. However, oil discoveries tend to make non-oil sectors less competitive via the appreciation of the real exchange rate (Dutch disease) and can induce macroeconomic volatility (van der Ploeg and Poelhekke, 2009). How does a young woman in Ozama St. North Ruimveldt win this game? GBJ will take up aspects of this question in next week’s installment.
\cite{https://www.bp.com/content/dam/bp/en/corporate/pdf/energy-economics/statistical-review/bp-stats-review-2018-full-report.pdf}