Will we hit a boom and boom or a boom and bust

BY: NICHOLAS DEYGOO

I am writing this to outline a few concerns that I have as we move to close 2019 and move into 2020. 2020 for Guyana will be a watershed moment in Guyanese history as 2020 brings with it ‘First Oil.’

This moment in our history will either go as the moment our nation took a major step towards becoming a developed nation or as the moment our nation fell into the resource curse trap as many other nations have such as Equatorial Guinea, Nigeria and Venezuela.

In essence, we can either push our economy into a boom and boom period or fall victim to a boom and a bust. I think that working in our favour is the fact that there are many who wish us well, and in doing so are pushing the conversation in their own way to help us, these groups include the Diaspora of Guyanese abroad, the international community and our brothers and sisters in our region; however, we ourselves must band together to overcome internal divisions especially ethnic divisions and complete the work needed truly take advantage of the resource that we are about to exploit.

Let’s take stock of the current situation – we have Production Sharing Agreements (PSAs) signed with the Guyana Geology and Mines Commission that is now housed under the Ministry of Natural Resources, we have a Department of Energy housed under the Ministry of the Presidency and we have a Natural Resources Fund.

We have also done some capacity building in our Guyana Revenue Authority, Environmental Protection Agency and Maritime Administration Department. Comparing this to Ghana, we see that Petroleum exploration and production activities are regulated by a number of laws in Ghana: —

The Petroleum Commission Act, 2011 (Act 821) (‘Petroleum Commission Act’); — The Ghana National Petroleum Corporation Law, 1983 (PNDCL 64) (‘GNPC Law’); — Petroleum (Exploration and Production) Law, 1984 (PNDCL 84) (‘Petroleum Exploration Law’); — The Petroleum (Local Content and Local Participation) Regulations, 2013 (LI 2204) (‘Local Content Law’); — Petroleum Revenue Management Act, 2011 (Act 815) (‘PRMA Act’); — Petroleum Revenue Management (Amendment) Act, 2015 (Act 893) (‘Amended PRMA Act’); — Environmental Assessment Regulations, 1999 (LI 1652) (‘Environmental Regulations’); and — Petroleum Income Tax Act, 1987 (PNDCL 188).

Similarly in the Government, regulatory and/or oversight bodies principally responsible for regulating oil and gas activities are the Minister of Petroleum (the ‘Minister’) provides the overall policy direction in the management of oil resources in Ghana; the Attorney General, under the Ministry of Justice, assists the Minister in the negotiation and drafting of petroleum agreements (the ‘Petroleum Agreement’) and the required laws and regulations regulating the oil and gas sector; the Petroleum Commission (the ‘Commission’) regulates and manages the utilisation of petroleum resources in Ghana, it also coordinates the policies put in place by the Minister, in regulating the utilisation of petroleum resources, the Commission has the authority to make regulations, issue permits and carry out necessary inspections and audits related to the activities of petroleum companies operating in the upstream and midstream sectors; the Environmental Protection Agency (the ‘EPA’) is responsible for enforcement of Ghana’s environmental laws, the EPA ensures that exploration and development of oil and gas is undertaken in an environmentally friendly manner; the Ghana National Petroleum Corporation (the ‘GNPC’) is responsible for the development, production and disposal of petroleum; the GNPC is required to ensure that Ghana obtains the greatest possible benefits from the development of petroleum resources, the GNPC participates in petroleum operations on behalf of Ghana with contractors under the Petroleum Agreements; the National Petroleum Authority (the ‘NPA’) is also given a broad mandate to regulate, oversee and monitor activities in the downstream petroleum industry.

In particular, it sets prices and supervises the bulk storage and transportation of petroleum products. (I should note that the content on Ghana was taken from the fact sheet put together by Bob Palmer, Partner at CMS Cameron McKenna LLP which I came across while searching online).

Clearly just using Ghana as an example, we have a high volume of work ahead of us to put in responsible management of our oil and gas sector. The risks of not doing this can be found in Equatorial Guinea.

I recently read an old article from Human Rights Watch, which I would encourage every Guyanese to read, titled “How Equatorial Guinea turned corruption into an art form.”

In the article, it starts out by stating that Equatorial Guinea has the highest per capita GDP in Africa but then goes on to say that it went from one of the poorest countries in Africa to one of the richest, but still the lives of the ordinary citizens have not been transformed.

The researcher that the article’s author was interviewing actually found some alarming trends – despite its oil wealth, the trend in Equatorial Guinea’s Health and Education sectors were that vaccinations and school enrollment rates had decreased over the past 20 years since the country found oil.

It should be noted that unless new reserves are found, the country’s oil reserves will run out in 2035. What went wrong? The article goes on to say that money was siphoned off in infrastructural projects, for instance, the country has five major airports and on one tiny island of just 5000 people, Annobon, the Government built a US$112 million seaport, but the island has no high school.

I shared the information about Ghana and Equatorial Guinea to say that we as Guyanese need to let go of our divisions and work together to ask for the appropriate legislation to govern the sector, as well as increased capacity in our Ministries and agencies minus the missteps such as the lack of a Local Content Legislation, the Petroleum Commission Bill which placed too much power in the hands of the subject Minister or the Natural Resources Fund legislation that needs more national buy-in.

We need to put the resources into our Revenue Authority and our Auditor General’s department so that when the bills for exploration costs come in they have resources to audit and give the nation the condence it seeks.

If and only if we build the regulatory capacity to manage this oil and gas sector will we experience the boom and boom period that we should benefit from, otherwise a boom and bust period synonymous with the resource curse awaits us.