COLUMN | Guyana – At a turning point [Offshore Accounts]

Featured Noble Bob Douglas Noble Bob Douglas

Guyana is probably the biggest story in offshore right now, and the country faces the most international scrutiny since the notorious Jonestown Massacre there in 1978, when cult leader Jim Jones led 900 of his followers to their deaths, drinking poisoned Kool Aid.

In 2018, ExxonMobil made its tenth oil discovery off the Caribbean nation and increased its estimate of the discovered recoverable resource for the Stabroek Block to more than five billion oil-equivalent barrels. Already, the American giant has signed a contract with SBM for an FPSO named Liza Destiny capable of producing 120,000 barrels per day. Installation of subsea umbilicals, risers and flowlines is expected to begin shortly, and the ExxonMobil management has reported that the FPSO will arrive in Guyana between July and September.

ExxonMobil has three deep-water drillships from Stena Drilling and Noble working in the Stabroek Block, supported by a fleet of ten Edison Chouest supply vessels. The drilling of development wells is already underway by the drillship Noble Bob Douglas, and the American supermajor is confident that the FPSO will deliver first oil in 2020. Additional FPSOs may be able to increase production to over 300,000 barrels a day by 2025. A massive windfall in a country of less than 800,000 people, giving Guyana approximately the same oil revenues as Norway per head of population.

So, in time honoured fashion, just as it stands on the cusp of great oil riches flowing into a small and relatively under-developed country, Guyana faces political crisis. Not for nothing do economists speak of the “resource curse,” whereby the discovery of oil and gas wealth in small and poor countries triggers corruption and dependence on selling crude, to the detriment of the rest of the economy.

Guyana’s neighbour Venezuela is the most grotesque example of a failed petro-state, blighted by the resource curse, but there are others. ExxonMobil, with its large volumes of oil production in Equatorial Guinea, Chad and Angola might be said to specialise in high production in small, poor and vulnerable nations, where its geologists seem to have an uncanny track record of exploration success.

"ExxonMobil, meanwhile, must wish that the outspoken engineer was locked in a Chevron conference room"

Usually opposition to oil and gas projects comes from environmentalists, arguing about the risks of pollution. In Guyana, ExxonMobil must have done a double take. The opposition there comes from a former Chevron manager, who argues that Exxon is ripping off his country. Guyanese citizen Dr Jan Mangal, believes that ExxonMobil has duped his government into signing a contract loaded in favour of the American oil company. Mangal had previously worked for Chevron as a project manager, shore base manager and engineer in Nigeria, the Philippines and Vietnam, before becoming Petroleum Adviser to the President of Guyana.

He now bills himself as a Good Governance Consultant and works independently, lobbying for fairer contract terms and more transparency in the legislature in Guyana’s capital Jamestown. He wants Guyana to get a better deal from ExxonMobil. Mangal cites that other, comparable countries have a far higher tax take from their oil fields than Guyana does with Exxon for Liza Field and for the other discoveries in Stabroek Block.

Mangal has been urging his fellow citizens to vote in a government which will renegotiate the terms of the contract with the oil major. He says that Guyana’s National Assembly should be the body determining the fiscal terms to be used in oil contracts, rather than the contracts being negotiated on a one-on-one basis by a government minister.

Mangal recently tweeted, “In places like Guyana which have a history of corruption, the more discretionary decision-making left to officials, the higher the risk of corruption. So if a minister can do a deal that allows for the transfer of billions from the country to the oil company then there is a huge incentive for bribery.” Most of us with experience in the oil and gas industry in the developing world would agree.

ExxonMobil, meanwhile, must wish that the outspoken engineer was locked in a Chevron conference room discussing logistics strategies for supply bases in Vung Tau, rather than bringing his industry experience to play in the politics of his home country. The oil company has warned of the dangers of “tearing up a signed agreement” and is pushing ahead with the development as quickly as possible to fast track first oil to pre-empt criticisms.

"In contemporary Guyana there is a danger that greed and political expediency will divide the country"

Meanwhile, the fragile coalition government of Guyana’s President David Granger recently lost a no-confidence vote, and is desperately trying to avert a general election and a constitutional crisis. Guyana is a fractured ethnically between people of Indian descent and those from Africa. The prospect of oil riches has increased the stakes in local politics. Never the most transparent of political systems, Guyana will face difficult choices on how to spend its large oil export revenues.

As tensions mount, there is a danger that politics could be played out along overtly racial lines, dividing society and preventing the country putting in place the framework for good governance of oil revenues for which Mangal has pressed, and President Granger has promised. The Granger government has its political roots in the minority Afro-Guyanese population, and came to power in 2011 after 23 years of rule by the Peoples Progressive Party (PPP). The PPP is dominated by Guyanese of Indian descent, the descendants of thousands of Indian workers who came to Guyana as indentured labourers in the colonial era after the abolition of slavery.

The vote of no confidence was won by the opposition when one government MP defected. President Granger’s government has filed court motions challenging the vote and arguing that the MP who changed sides and voted against them in December holds a foreign passport and is not entitled to be in parliament. He flew to exile in Canada. There are also claims that the PPP bribed him to change sides and vote against the government.

In the Jonestown massacre, a charismatic leader led his deluded followers to their deaths. In contemporary Guyana there is a danger that greed and political expediency will divide the country, preventing a reasoned analysis of what fair terms with ExxonMobil look like, and how the rush of oil money should be invested. The misery of neighbouring Venezuela shows how important the decisions the Guyanese make now are.

They need to look at working together to spend the money ExxonMobil’s investments will deliver wisely, on infrastructure and projects with long term benefits, even if the oil runs out or the oil price crashes. And they also might want to question how Edison Chouest has so many vessels working in the country. Good governance should apply everywhere, all the times. Not just to those doling out the Kool Aid.

Last modified onFriday, 15 March 2019 15:01

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