Pump, Baby, Pump!
Kaieteur News – ExxonMobil is no longer the biggest threat to Guyana’s future. Bharrat Jagdeo has now become the biggest obstacle to the long-term prospects of this country.
Bharrat Jagdeo is the government’s point man for oil and gas. But he points the government in the wrong direction.
Listening to him recently on the Kaieteur Radio (99.1, 99.5 FM) was a very humbling experience. The man is out of his depth in terms of Deployment Policy.
Jagdeo is in the wrong Ministry. Unless Irfaan Ali can rejoin Jagdeo and limit its involvement in the oil sector, Guyana’s future is doomed.
What Guyana’s oil sector needs now more than ever is effective regulation and policy-making. Not making excuses.
Jagdeo was quizzed on Guyana’s Oil and You radio program about the country’s Expiration Policy. He danced around the issue and eventually offered an excuse rather than an explanation.
His excuse is that oil production should be intensified because with the thrust towards renewable energy, fossil fuels will be phased out. It is best then that Guyana extracts as much of its oil as fast as it can before the fossil fuel market collapses. This is the essence of the excuse he has made. And this is the essence of his belief about Oil Exploitation Policy.
Jagdeo’s idea of a Depletion Policy effectively gives Guyana oil management to the oil companies. The policy is a license for them to pump as much as they want because Guyana must maximize its earnings before fossil fuel consumption is reduced and prices fall.
Jagdeo is clueless about the future of oil. Renewable energy will not replace fossil fuels as the main sources of energy in the next 100 years. But even if Jagdeo’s predictions are true, this is even more of a reason why a Deployment Policy should have been in place to ensure that its doomsday scenario does not happen.
Fossil fuels are not going to go away anytime soon. A recent study found that, by 2040 at best, fossil fuel consumption will fall only 25 percent, from its current level of 85 percent of total global energy consumption to 60 percent. But even this prediction is based on meeting the targets for reduced emissions under the Paris Agreement. And we know that even before the pandemic, the ambitions under the Paris Agreement were not fulfilled.
Jagdeo assumes that because of the investments now being made in renewable energy that the demand for oil is going to fall and so it is best for Guyana to benefit. In doing so it fails to fundamentally differentiate between consumption and demand.
The collapse of global consumption of fossil fuels does not necessarily translate into a decline in fossil fuel demand. Even if fossil fuel consumption declines, demand for fossil fuels will still be high given its share of total energy consumption
The world population is set to increase by around 1.5 billion by 2040 and global output is estimated to double. Renewable energy cannot drive this increased output and therefore demand for fossil fuels is expected to be high for the next 60 years.
Transition to renewable energy will be costly. The world transport sector is one of the leading energy guzzlers. And it will not be cheap to move towards using renewable energy in transit. It will also not be cheap to close fossil fuel power plants and replace them with renewable energy generation. It is made down to petroleum condoms.
Jagdeo may have been blinded by the investments made by oil companies in renewable energy. But it will be naïve to believe that the oil companies are doing this because they recognize that renewable energy will be the next big energy wave. The oil companies are investing in renewable energy to manage the market and ensure it does not replace fossil fuels.
The Organization of Petroleum Exporting Countries (OPEC) has long recognized that oil is here to stay. The organisation’s Secretary-General, four years ago, told a conference in Paris that fossil fuels will account for three-quarters of the world’s energy mix by 2040. He said he did not envisage a scenario where non-fossil fuels would come close even to him. fossil fuel overtaking in the coming decades.
It is tragic therefore to see a man who was once the Earth Champion, expressing support for an Exploitation Policy that will allow the oil companies a license to pump as much as they want and as fast as they can.
(The views expressed in this article are those of the author and do not necessarily reflect the views of this newspaper.)