There are plenty of theories as to the cause of Guyana’s poverty when compared to the rest of the English-speaking members of Caricom. But what is absolutely believable is that when one travels through the resource basins (the Hinterlands), one is left absolutely convinced that its troves of natural resources have not been its deliverance from destruction; but its curse. McKinsey, one of the world’s leading consulting company, estimated that “69 per cent of the people who live in extreme poverty are citizens of countries where oil, gas, and minerals like gold play a dominant role”.
This oversell today by politicians that the discovery of oil will be the salvation of the Guyanese nation is nothing but poppycock unless those resources are properly managed. There is enough evidence that if improperly managed, as in the case of Equatorial Guinea, the oil resources will be Guyana’s curse. The people must not be misled into believing there is big money or many new jobs for them in this deal between now and 2020 and even beyond.
As an example, there is enough evidence to prove that for all of 2016, the economy of Trinidad has gained more from the discovery of oil in Guyana than the local economy. The Trinidadian firms have already commenced servicing this oil facility and these contracts are all set to expand. It is not the fault of the Trinidadians that they have a core competence in the oil services industry; they discovered oil a long time ago. That is why it is not accidental that there is a daily direct non-stop American Airlines flight from Houston, Texas to Trinidad. It is also not an accident that there is a fleet of helicopters based at Piarco International Airport all set to service the oil facility in the Guyanese waters. Trinidad has an experienced and well-developed oil services industry, which has given that country great advantage in oil logistics and other 3rd party vendor services. So if one follows the money on this oil deal to date, only a monthly “rent” is there for Guyana while the real jobs and side businesses are going to be farmed out elsewhere.
That is why it is vitally critical at this stage to understand the cash flows behind the “oil rent” and plan for it skillfully. From all the computations I have seen, the “oil rent” is not expected to be more than US$15 billion over the life of the well, if the current projections hold. Even if a sensitivity analysis is done, the resources contractually due to Guyana will vary at most between US$13 billion and US$18 billion.
So this situation begs the question – Has a White Paper been completed on what we are going to do with this “oil rent”? Are there any plans in there for the quartet of mega projects that can permanently transform Guyana’s economic fortunes – Oil Refinery, Deep Water Port, Road to Brazil, Amalia Hydro Project? For the record, the total price tag for these four projects can consume almost half of the “oil rent”.
In the final analysis, I want to caution the Guyanese people, if this “oil rent” is misused on Ponzi scheme projects that have no sustainable return on investment, it will cause the social contract between the rulers and the people to break down. We have seen all across the world, especially in Africa, that some rulers tend to spend their mineral rent on things to benefit their own personal interests rather than the people’s interests. In those cases, their people remain in extreme poverty, abhorring their rulers. That is a tinderbox situation. If one observes the record of the Granger Administration so far, it illustrates a sort of “big man” kind of capital investment that is grounded in kleptocratic mindset (good example – the D’Urban Park Parade Ground Project at a price tag of more than G$1.3 billion). The “oil rent” will make impoverishment of the ordinary people ten times worse, unless good governance returns to the Granger Administration.
