Who really needs to be checked?
Kaieteur News – Vice President Bharrat Jagdeo believes that fossil fuels are being phased out worldwide and that Guyana should extract as much oil – as fast as it can, in the shortest time possible, to maximize the country returns. This is an erroneous policy.
But the issue in question is not new. It has been discussed before. As late as December last year, Jan Mangal, an expert in the oil industry, offered some advice by letter to the editor, published under the title: “Pumping more oil may not be the best strategy for Guyana. ”
In that letter, Dr. Mangal irrevocable arguments why Guyana should not seek to extract its oil and as quickly as possible based on the belief that the development of renewable energy could result in our oil remaining in the ground and in diminished value.
Dr. Arguments Mangal against this is that the strategy “Drill baby drill! Baby pump pump! ”Is one, which benefits the oil companies. He said the oil companies are always keen to pump everything up as quickly as possible as this gives them quick returns on their investment and because they know that as new oil-producing countries become safer over time, their be inclined to demand better terms. So the oil companies want to get in and out as quickly as possible, especially when the oil contracts are stacked in their favor.
Dr. argues Mangal that countries benefit from continuous production over generations by using depletion strategies to limit production even if it is lower production. This is because of the learning curve, which is taking longer for small countries like Guyana. It highlights countries like Equatorial Guinea and Venezuela.
There is another side to this debate. The reason is that it is better for small countries like Guyana to have lasting benefits over a long period of time rather than being suddenly alert with petrol dollars. Venezuela is a good case in point. It failed to diversify its economy because it was so flush with oil revenues that it never bothered to look to a future outside of petroleum production. Trinidad is now facing a similar fate.
Then there’s Dr. Mangal distinguishes, which Jagdeo seems to forget: the difference between peak production and peak demand. Dr. Mangal notes that the world has often been wrong in predicting peak production. It highlights the doomsday scenario in the 70s when the world was predicted to run out of oil. The same tone is being reshaped today, this time around the prospect of oil being echoed by renewable energy.
Dr. Mangal notes that the idea of a short window for oil production is a tactic for the oil companies. They use this ruse to lure countries to produce as much oil as fast as possible. It would not be surprising to hear that Jagdeo could have fallen, hooked, line and sinker, for what the oil companies wanted it to believe.
However, Dr. Mangal thinks the sky is about to fall on our heads. While subscribing to the view that demand will inevitably be reduced, it is questionable when this will happen. And he notes that demand for the more nasty hydrocarbons, such as coal, will first decrease before demand for sweet oil declines. And with many countries investing in coal production, it can take many decades before the higher quality oil is affected.
Guyana noted, failed to enjoy economic success despite its rich resources. So trying to exchange money now on oil by going on a production blitz does not necessarily mean that economic success will follow. In fact, this may well be a counterproductive strategy.
Dr. Mangal proposes, instead, that Guyana should limit oil production to one or two projects (Liza 1 and Liza 2), and should negotiate for a fair share of the funds from those projects. He asks that if demand for oil is expected to decline, is it not more sensible to increase our share of prudent volume of oil, instead of pumping vast volumes to give ExxonMobil the lion’s share?
But as a warning, he notes that our local politicians have no interest in negotiations for the benefit of the country and its people. Can say that again! Without having to do a corpus colostomy!
(The views expressed in this article are those of the author and do not necessarily reflect the views of this newspaper.)