Following an enormous find of oil in Guyana by ExxonMobil, Executive Director of the International Monetary Fund (IMF) Otaviano Canuto recently suggested that the investment of a Liquefied Natural Gas (LNG) plant to refine the gas would increase the country’s financial revenues and bolster employment.
Political activist David Hinds
Canuto, who issued a statement subsequent to an IMF’s executive board meeting in May which deliberated on the country report, stated that the significant oil and gas finds off the coast of Guyana has nudged the government to undertake exploration and other capacity-building efforts. He said further that they are currently reviewing the possibility of developing an LNG plant.
He evaluated that this investment will generate “fruitful rewards” to the Guyanese people through increased fiscal revenues, employment and income—which will thrust Guyana towards attaining sustainable development goals while mitigating the country’s exposure to any subsequent increase in oil prices.
In February, he stated that an Oil and Gas Committee was established and charged with developing the sector. He also noted that external assistance is being sought to establish a Sovereign Wealth Fund and supporting legislation.
Minister of Natural Resources Raphael Trotman and Finance Minister Winston Jordon have just returned from a visit to Uganda, where they examined how that state manages its oil resource and adheres to its Sovereign Wealth Fund.
“It should be noted that the authorities have taken an extremely conservative stance and have not factored in the possible future revenues from the gas into their medium-term framework,” Canuto indicated.
The IMF report on Guyana purported that production might begin as early as 2020.
Earlier this month, ExxonMobil declared that drilling results from the Liza-2 well, the second exploration well in the Stabroek block offshore Guyana, confirmed a world-class find with a recoverable deposit of between 800 million and 1.4 billion oil-equivalent barrels.
Political activist David Hinds had warned the government to not make the same mistake as Trinidad and Tobago did by not developing a long-term plan to manage its oil resource.
Although oil is welcomed, Hinds stated that government should start taking the necessary steps geared towards the proper management of the resource. He highlighted that it is an “old problem” for Guyana’s resources to be mismanaged, in terms of foreign investors being the prime beneficiaries of the resources.
He had further stated that Guyana only collects royalties from its resources while other countries benefit from the cream of the wealth. Stating that there is an overemphasis on attracting foreign investment, Hinds suggested that Guyana divert and invest in developing internal mechanisms and economic structure.
Hinds posited that Guyana should start envisioning a novel economy, surrounded by oil.
He indicated that if Guyana cannot develop its own oil refinery, then the country should partner with Caricom countries to construct one.
Trotman had indicated that an investment of this magnitude would cost an estimated US$2 billion to establish and so the government is weighing whether a processing plant would be counter-productive or economical.
Despite the region having an oil refining capacity, Trotman stated that several countries had built their own refineries and watched them flop. “There is Venezuela, Suriname, Aruba…so before we think of having an oil refinery we need to look at the demand and supply,” he mentioned.
According to Trotman government does have a long-term plan to deal with the oil and would be revealing factions of it as the year progresses.
“We are not sitting idly by…we are planning and we are exploring different possibilities,” he added.
Since the discovery of significant oil deposits, Guyana has gained the support of the Mexican, US and Canadian governments, along with the Commonwealth in providing support, expertise and experience for the emerging industry in Guyana.
