Guyana's Petroleum Management Programme website.Guyana's Petroleum Management Programme website. [Source: Guyana's Ministry of Natural Resources]

It looked so promising in 2019: President David Granger announced the start of oil production in the South American country and declared December 20 to be National Petroleum Day. In a televised address, he promised a higher quality of life for all and vowed: ‘No one will be left behind.’

For a country with 43% of people living below the poverty line of $5.50 a day in 2011 and one of the world’s highest emigration rates, this was intoxicating news. The early signs looked good, with Guyana becoming the world’s fastest-growing economy even as the global Covid pandemic took hold. Though the International Monetary Fund’s heady forecasts of 86% growth in 2020 never materialised, GDP still grew by an extraordinary 44% – an eightfold rise.

Guyana was poised to become one of the world’s leading oil producers,  analysts predicted, soon to be pumping more than 1m barrels of oil a day, or four times the rate of Saudi Arabia relative to population. In 2017, total government revenues were $900m but the World Bank estimated last November that this could more than double to an average of about $2.1bn a year, based on oil at $54 a barrel – now over $100 since Russia invaded Ukraine.

The phenomenon of the ‘resource curse’ can be clearly seen in fellow Commonwealth countries, with oil nearly ruining Nigeria, Trinidad & Tobago struggling with a world-leading crime rate despite abundant gas reserves, and falling oil prices leaving Uganda mired in debt. Those who feared it would strike again in Guyana have begun to see warning signs: after years of rising scores, it fell in Transparency International’s 2021 corruption perceptions index – below the global average to a level signifying ‘serious corruption problems’. Many Guyanese are already sceptical. ‘They told us oil will make us rich. We’ve got gold, diamonds, sugar in this country. We should be rich from that but we’re not. So why will oil be different?’ asked one.

Whatever oil wealth does remain in Guyana must be shared equitably between different ethnic groups. In a fragile democracy, where party politics are polarised between those of African descent (who largely supported the previous government of A Partnership for National Unity/Alliance For Change) and those of Asian descent (who generally backed the People’s Progressive Party/Civic), the threat of political violence boiling over, as it did after 2020’s disputed elections, is always near – and racist attacks can erupt at any moment.

It does not help that Guyana is hobbled by a grossly inequitable contract, described by the natural resources minister, Vickram Bharrat, in February as ‘one of the worst ever between a government and an oil company’. An analysis of 130 oil contracts ‘exposes inferiority’ of Guyana and ExxonMobil’s 2016 agreement, the local Kaieteur News concluded, pointing to how Guyana had to pay Exxon’s income tax as just one egregious example. It made the case for publishing Guyana’s public contracts, said Transparency International. When elections in 2020 returned the PPP/C to power, the anti-corruption organisation Global Witness urged it to renegotiate the ‘exploitative oil deal’. Exxon needed Guyana more than the country needed the oil giant, energy experts said.

Under the 2016 deal, the consortium of ExxonMobil, Hess Corp and the Chinese state-owned CNOOC secured such ‘favourable fiscal terms’, according to analysts IHS Markit, that they were in profit with an oil price over $29. It has not been that low since 2003. The Institute for Energy Economics and Financial Analysis said the contract provided ‘less than the average take’ and called the terms ‘unconscionable’.

Before Guyana could profit from its oil, ExxonMobil presented its bill for pre-contract costs, which it said amounted to $460m, in 2018. The IEEFA noted that 18 months after IHS Markit had been hired to evaluate these costs, no audit had appeared. By November 2020, the audit had reportedly been completed but two months later, Guyanese opposition politicians were asking in parliament about whether it had been completed and if so, why it had not been made public. A year later, questions were being asked about Exxon’s enormous claim for $9.5bn in post-contract expenses. And the vice-president, Bharrat Jagdeo, admitted in February last year that Guyana did not have the technical know-how to monitor Exxon effectively.

Another potential hazard is whether the consortium and Guyana have adequately prepared for a possible oil spill similar to the Deepwater Horizon disaster or the cost to the ecosystem. Vincent Adams, Guyana’s former environment chief, fears a similar catastrophe could happen all too easily, pointing to Exxon’s consistent flaring of gas, despite assurances that it would not. ‘Exxon is only going to be here for 20 to 25 years,’ he said last year. ‘When they make all their billions, and they’re ready to pack up and they’re gone, we’ve got to deal with the mess.’

But, as Exxon made further oil discoveries in Guyana last month, raising recoverable reserves to nearly 11bn barrels, what is missing from most of the overexcited analyses of Guyana’s oil bonanza is any consideration of how this can be squared with the need to reduce the amount of carbon dioxide in the atmosphere, which climatologists agree is vital to mitigate climate change.

In 2015, Guyana signed up to the Paris climate accord, agreeing to end its reliance on fossil fuels, but Exxon’s Guyana operations – from drilling for the oil to burning it – will release 125m tonnes of CO2 a year until 2040 (equivalent to 15 large coal-fired power plants). Though 80% of its land is rainforest, this huge fossil fuel project could turn Guyana from a carbon sink to a ‘carbon bomb’. Despite all that the wealth might do for one of the hemisphere’s poorest countries, it would probably be better for Guyana and the world if the oil stayed in the ground.

Oren Gruenbaum is a member of the Round Table Editorial Board.

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