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Guyanas oil discoveries reignite environment versus development debate

Guyanas oil discoveries reignite environment versus development debate

China has been a major contributor to Guyana’s economic growth since 1970s when they established ties. They have a presence in infrastructure and fisheries as well as in gold mining and forestry.

China is now well placed to strengthen bilateral ties. Guyana has one of its state owned oil firms, and China has the Stabroek Block, which holds the largest deep-water oil resources in South America.

This concession is managed by ExxonMobil subsidiary Esso Exploration and Production Guyana Limited. Esso, its partners, the USAs Hess Corporation, and the China National Offshore Oil Corporation, (CNOOC), have been the third-largest Chinese national oil company. Have discoveredThe site is estimated to have 10 billion barrels of equivalent oil recovery.

CNOOC has a 25% stake in this oil-rich 27,000km2 block. Hess is at 30% and EEPGL has 45%.

These important resources were discovered and have sparked discussion in the local as well as international arenas, including on the governance, environmental, climate, and governance risks, as well the future role of Chinese companies and Guyana’s burgeoning oil-and-gas industry.

Guyana has China as a major source of investment

CNOOC is a relatively newcomer to Guyana’s oil industry. The sector had a production capability of only 20,000 barrels. 120,000 barrels per dayDecember 2019. According to Arthur Deakin (codirector for energy analysis at Americas Market Intelligence), China’s state-owned oil corporations are expected to show their economic strength over the coming years. He says that China’s role will grow alongside Guyana’s economic prosperity.

China offers Guyana something the US doesn’t: speed. They have a centralised government that allows them to disperse large amounts of funds without bureaucratic delays and no bureaucratic red tape. China could win many of the projects that will help Guyana’s energy sector and oil industry.

Deakin cited the Amaila Falls hydropower plant as an example: The project was completed recently given government approvalChina Railway Group Limited will build, own and operate the railway. It will then supply electricity to Guyana Power and Light.

Our job as a small state and member of the World Trade Organization is not to exclude states who have an interest or a potential to invest in Guyana.

Deakin indicated that Guyana will require foreign direct investment as it seeks to develop its natural gas resources and industries. He said that this is not going to be from the US or western nations. He also suggested that China would receive a lot of it. According to the AMI analyst, China’s influence on the oil sector will increase as Guyana grows.

A Trinidadian energy expert, who worked with the Guyana’s current and former governments on the legislation for the oil industry, supports such a prediction. He chose not to be identified. According to the analyst, China’s investments in Guyana will grow over the next few years.

He spoke out about CNOOCs offshore direct investment and said that the state-owned firm could purchase stakes in other offshore blocks, such as the Orinduik block. It is led by Tullow, Canada’s Eco Atlantic, Total SA of France and Qatar Energy.

Eco, which is focused on finding new frontier areas that require low-cost entry, is known for cashing out projects early. He suggested that CNOOC could look to acquire Eco’s stakes and Total’s stakes, given the growing momentum for the global energy transformation.

The game is very dynamic and there is a lot at stake in Guyana, according to a Trinidadian consultant.

CNOOC believes that Guyana’s development is a complement to Chinas foreign policies goals. Read more: CNOOC has an honorable mission. Statement2019: It continues to say that the Guyana Stabroek Project will continue to grow production and storage for Guyana Stabroek over the next few decades and contribute to high-quality, sustainable development.

Climate and governance risk

However, the discovery and subsequent development of oil has sparked controversy in Guyana about the sustainability of the resource and the government’s desire to preserve its low-carbon credentials.

Melinda Janki, an international Guyanese lawyer and strong advocate for environmental protection, stated that neither the current nor previous Guyanese governments have demonstrated their ability to stand up to oil companies or enforce strict penalties when environmental violations are detected, or when their soundness is questionable.

Janki is also part the legal team that represents two Guyanese, who have created the first constitution. ExxonMobils operations are under attackIn the Caribbean. The case claims that the US oil majors Liza Phase One and Liza Phase Two, as well as Payara projects in Guyana, are so significant that they infringe on citizens’ right to a safe and healthy environment.

400million

Since Guyana began extracting offshore oil from Guyana in 2019, cubic metres have been burned.

Janki was one of the 30 Guyanese stakeholders who wrote to ExxonMobils shareholders about the environmental danger posed by the continued gas flaring aboard the Liza Destiny floating storage and offloading vessel (FPSO). According to concessionaires Esso and Hess, the Stabroek bloc will require ten FSPOs in order to recover its 10 Billion-barrel reserves. Nearly 400 million cubic metres have been flared to dispose of the gas associated in oil production by burning it.

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However, there are concerns about the environmental impacts of the Stabroek Block operation. Some Guyanese also fear that the country is already being affected by the resource curse. This is the negative impact of resource abundance on meaningful economic growth as well as indicators of democracy.

Carl B. Greenidge is a former Minister for Foreign Affairs and currently an advisor on border issues. He doesn’t share this pessimistic view. He stated that Guyana will be able to develop its economy and accelerate its oil and gas discovery and development. This view is shared by many Guyanese.

He suggested that China could be Guyana’s key development partner as it grows into a strategic oil & gas player. He also stated that traditional revenue-earners such as agriculture and mining have been a strong support to Guyana’s economic growth over the years but that oil has the potential to transform the country as quickly as oil. This is especially relevant now that Guyana, which was independent from British colonial rule, may be able retain more of its economic benefits.

Greenidge also stated that Guyana’s future growth will be dependent on infrastructure investment and human resources. The former minister said that Chinese companies had been conducting technical and economic feasibility studies for Guyana’s infrastructure. Guyana officially endorsed China’s Belt and Road Initiative (BRI), in July 2018.

Transport infrastructure, including deep-water ports, major highways, and other infrastructure is a key focus. US companies have not shown a comparable interest in this sector, nor in producing capacity such as manganese or bauxite mining. It would be reasonable to expect China’s companies bid more [often]When the time comes, they will be more than those in the US.

Greenidge stated that Guyana is a small state, but a member of the World Trade Organization. He said this in reference to the country’s many international development partners. Guyana must establish appropriate rules and ensure that its executive institutions can implement and enforce them.

Deakin, a Guyana-based journalist who has followed the story of Guyana’s oil since its inception in 2015 said it is too early for the country to know if it is suffering from a resource curse. Deakin did however note that the government’s closeness to oil sector is a red flag. Current legislation places too much control in the hands Minister of Finance and there is no mechanism to ensure transparency or accountability.

According to the AMI analyst, industry practice dictates that there should a non-interference approach and that the government should establish an independent body or commission to oversee the sector. This is in contrast to the current institutional arrangement, where the regulator is located within Guyana’s government. President Irfaan Ali, however, has recently stated plans to establish an independent authority. Before the 2021 end.

Greenidge believes that the wider environmental goals and the promise for transformative economic growth are at odds in the case Guyana’s oil. This is a challenge faced by many developing countries as it seeks to grow. He stated that critics should not be allowed to engage in any petroleum sector activity in Guyana. Per se Many people mistakenly assume that they are supported by the majority of the population and that the poor can still live in a better place without oil development.

Greenidge said that the discovery or presence of a resource should not be equated with a crime. He said that prosperity can come with the right governance mechanisms, which is what the country wants.

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