August 09, 2018
WPA has been paying close attention to the public debate in the media and other fora on the consequences of the imminent oil and gas economy. We think that that debate has been useful in placing the issue in the public domain where it belongs. WPA has always championed the cause of open and transparent governance as key to democratic advancement and national development. It is for that reason that we were the first political party that called for the publishing of the contract between government and Exxon.
After long deliberations at the executive level, we wish to intervene on this issue which we think is the most important socio-economic development to occur in Guyana since the attainment of political independence 52 years ago. We wish to make it known that although WPA is a member of the governing coalition and have within our ranks persons with known expertise on the economics of oil and gas, we have never been consulted or briefed on the negotiations and other official deliberations on the matter.
Hence our comments and recommendations today are not based on insider information or access to any official files, documents, public officers or Ministers of Government. Further no person associated with the production and publication of this statement or their immediate family members have sought and or received any payments from Exxon and partners for any services or products, whatsoever, and will not receive any benefits from either Exxon or the Government of Guyana.
WPA believes that the forecasted revenues from oil and gas provide us with the best opportunity thus far to break out of the cycle of underdevelopment that has plagued our country these five decades. For us the central question is how the expected wealth would help lift the poor and the powerless out of the depths of poverty.
It is against this background that WPA fully endorses the call by Professor Clive Thomas to make Guyana’s petroleum money directly available to its poor and powerless households. Further we dedicate our political efforts as a Party to pursue this programme within the APNU, within the APNU-AFC Coalition, and among the broad masses of Guyanese people.
Resource Discoveries and Finds
The transformational prospects opened up for Guyana’s people by its recent petroleum finds and discoveries cannot be fully described by words like bonanza, El Dorado, black gold, windfall, treasure trove or even “godsent”. It is remarkable that for the first half of 2018, Guyana has had more petroleum finds and discoveries than any other country on earth! Historically, to move from a find of 600 million bbls in 2015 to 4 plus billion bbls, with scheduled production start-up for early 2020, is unprecedented. This rapid development is partly responsible for the lag in setting up the institutional and legal framework, which saw little work by the previous regime although it received G$386 million in oil prospecting fees from 2002 to 2010.
Based on the 1999 United States Geological Survey’s (USGS) forecast, WPA has, as far back as 2016, boldly predicted that by the end of the next decade, potential proven reserves will rise to an amount, close to the mean (average) of the USGS forecast of 15 plus billion bbl., thereby producing at about 2.6 million bbl. a day, and ranked among the world’s top 15 top oil producers. Further, mean gas reserves are estimated at 48 plus billion cubic feet (USGS). Additionally, the oil is of high quality. On average across fields this is estimated at >35 API and <0.5 Sulphur content (light sweet crude). Indicative crude price is forecasted by Clive Thomas at US$60-74 74 (medium) and US$75-89(high) confidence, with production cost at US$52-56 per barrel in deepwater and ultra-deepwater (Kristopher, 2015). This means that oil will be a profitable venture giving us the fiscal space to transform Guyana over the next thirty years.
The National Debate
There have been many negative contributors seemingly wanting a disaster to befall Guyana and its development prospects. Many can be seen as opportunistic hustlers, purveyors and frauds pretending to offer expert views which are repeated in the media and echoed by a supporting cast in sections of middle class civil society. The only positive from all the doom and disaster preaching is that it has dampened expectations, hopefully though not to a point where the people firmly believe there is nothing much in this for them. There is much in these discoveries and finds for all Guyanese. WPA feels that the national debate must be guided by the notion that it is easier to manage wealth and abundance than it is to manage poverty and destitution. Common-sense tells us it is easier to create jobs, feed, clothe, house ourselves and offer good physical and social infrastructure for all, if you have an abundance of resources compared to when you have too little. We call on all civic organizations to begin discussions on the prospects of the coming oil and gas for empowering the poor and revitalizing village economies. We urge government not to make final policy and governance arrangements without inputs from these discussions.
We ask all Guyanese to ask themselves the question-what among all the threats which face Guyana, in its coming time of oil and gas is the most existential. Without question it is Venezuela. Given this answer, then honestly consider, if it were not for US and Chinese control of the production and export of our oil and gas, whether this would still be going on today (or) would it not have already been bombed out of existence. Note petroleum and its numerous wars and violence. Then again, which companies worldwide have the capability of detaining petroleum from ultra-deepwater reservoirs?
Rising to the economic challenges
In truth, all economies are difficult to navigate in today’s turbulent global environment. We must never underestimate the developmental challenges associated with managing the petro economy. We call on all progressive thinking Guyanese to rise to these challenges. We must approach them with a mind-set that we can overcome through our collective efforts supported by a caring government.
Crucial among these challenges are 1) the threat of “Dutch Disease” 2) the burdens of the “Resource Curse” 3) dangers of the “Governance Curse” 3) the lack of “Absorptive Capacity” 4) the entrenchment of an “Enclave Economy” 6) the persistence of “Implementation Lags” 7) the maintenance of “Intergenerational Equity” 8) International Institutions pressure to spend only on the basis of the “Permanent Income Hypothesis” 9) “Managing Public Expectations” and , 10) “Integrating PSA Petroleum Revenues and the National Budget”
To be forewarned is to be forearmed. We in the WPA refuse to view these problems as beyond our collective capacity. Rather it is a matter of political will, strategic planning and management of resource revenues, and a can do mind- set in producers, workers and policy makers. We recognize that it is not only up to Government to invest wisely, but the entire population must do so too. We urge all Guyanese to invest in the development of the talents of their individual households as their contribution to reduce poverty.
Despite the condemnation of Guyana’s PSA, the Government take is estimated at 50 to 60% ̶ a higher proportion than the doomsayers expected. While there is need to improve the PSAs as we go forward, both for new and old investors, it is not enough to simply condemn what is there. This has been a natural course of evolution for several countries.
The WPA recommends the following:
I: There should be no spending on an oil refinery or promises of transfers/subsides to any privately built one. However, we support an oil refinery if private investors find it commercially feasible, or can do it without public cost to the treasury.
II: We support whatever it takes to get natural gas into the national grid (GPL) because gas complements green economy initiatives. Further, we note that most towns are located near rivers making it possible to use on-shore gas facilities and flexible gas storage unit to transport gas to consumers. This approach will reduce investment cost and time lag to “first gas”.
III. We urge Government to commit a percentage minimum for cash transfers to the poor and powerless who know their “needs” better than any government, and want to control their own development rather than become dependent on political- state patronage. We recognize that cash transfer schemes are not perfect nor free of risks. However, cash transfer schemes show the best practical results for combating poverty which has increased from 36 % in 2006 (World Bank, 2008) to 40.1 % (IDB, 2018). WPA sees cash transfer as a direct attack on income poverty and financial stress among the poor and powerless.
The core design problems for cash transfers from a literature review for 2000 to 2013 are: the size, duration and form of transfers. The key results to be obtained are: improved school attendance, health status, nutritional intake, female choices cum decision-making and reduced child labour.
IV: We recommend the establishment of a Ministry of Renewable Energy to frame policy, garner resources and coordinate actions to improve energy efficiency, reduce energy costs, and uptake of achieving non-carbon energy technologies.
WPA intends to use whatever resources at its disposal to advocate and fight for these positions. We will take the discussion of our proposals into the communities, among stakeholders and civil society organizations and directly to the halls of government. While we recognize that we do not have a monopoly on ideas regarding this issue, we feel that history and available data are on our side. For us, it is not only about political economic correctness, but more importantly it is about the humanity of our people, especially the poor and powerless. We are determined to ensure that policies are enacted to uplift the least among us who for too long have had to endure the scourge of poverty and want.
WPA expects some negative reactions to our proposals and we welcome the concourse of ideas. But we ask all Guyanese to resist temptations to use stereotypes of the poor and foreign concepts as the basis for discussion. For example, we have heard the term “welfare state” being thrown around. We warn Guyanese to beware of these borrowed concepts that are being used as jumbies to scare you away from demanding your fair share of the imminent wealth. The primary function of any State regardless of ideological orientation is to look after the welfare of its people.
WPA fully supports the use of common wealth to invest in our physical and social infrastructures. We will fight for these approaches. But we feel that government must also invest directly in citizens’ ability to engage in self-activity as a means of self-emancipation. This concept which was popularized by our own Walter Rodney and has long been a guiding principle of the WPA is at the heart of our proposal for cash transfers as one item in the menu of proposals. Direct investment in people is critical if we intend to use oil and gas wealth as a tool of emancipation and liberation.
Despite the risks involved and the possibility of mistakes and failures, WPA is optimistic about our future. Challenges are inevitable, but our party has confidence in the capacity of our people to seize the moment and turn the tide of history in our favour.