Capacity can be acquired once the price is right

Jan 19, 2021 Features / Columnists, Peeping Tom

Kaieteur News – Three criticisms have been levelled against the PPPC’s planned gas-to-shore (GTS) project. The first is that Guyana does not have the capacity for such a project; the second is that the project is in contradiction with the country’s international environmental commitments; and the third is that the project lacks transparency.
The first criticism essentially argues that the GTS plans are too ambitious. Guyana can hardly manage its oil sector much less to take on the additional responsibility, at this stage, of a GTS project.
The APNU+AFC is principally responsible for the country’s limited capacity to manage its oil and gas sector. The Coalition Government had five years to ready the country for oil and gas, and specifically to develop the institutional capacity for oil and to decide what it was going to do with the gas, which is produced during oil production.
ExxonMobil had indicated that it would have needed to initially flare some of the gas but that some of it would have to be re-injected into the seabed in order to raise the pressure of the wells. The remaining gas would be available for commercial development.
The Coalition had five years to determine what it would do with the unused gas. The logical choice would have been to develop a GTS project. The Coalition agreed to this but took close to five years to pussyfoot over where the GTS project would be located. Not being able to get pass the hurdle of deciding on a location, oil production commenced and there was no plant to process and utilise the unused natural gas.
Institutional capacity to manage the oil and gas sector is seriously lacking. But the absence of institutional capacity needs not become a humbug.
Guyana does not necessarily need to build capacity. It can acquire the “know-how” from elsewhere.
It has done this before. The Green State Development Strategy was outsourced to an international organisation. When the APNU+AFC had to value the assets of the Guyana Sugar Corporation, it contracted an international accounting firm. When it had to market the country’s oil, it brought in an international firm. Capacity can be acquired.
Vice President Jagdeo continues to harp about building the capacity to audit the pre-contract and production costs. But why try to build this capacity when there are reputable and independent firms which specialise in undertaking such audits?
Guyana has wasted billions of dollars in trying to build local capacity with very little returns in other sectors. The process of building capacity usually involves hiring some overseas-based Guyanese consultant. These consultants receive fat salaries. And by the time they leave, there is a need for another round of institutional capacity-building.
Whatever skills Guyana needs for the management of the oil and gas sector can be acquired on the international market once the country is prepared to pay. Instead of doing this, the Coalition hired an environmentalist to manage the oil and gas sector and a petroleum specialist to manage the environmental sector.
Another pitfall of trying to build local capacity rather than acquire skills has to do with the retaining of such skills. We train people and then they migrate, which results in a loss.
There is however always a need to develop some indigenous institutional capacity. You cannot run a country simply by outsourcing all your needs. But there is no need to assume that because you do not have the skills presently available locally that this should constrain the plans which you have.
While Guyana remains unprepared for oil and gas, this need not constrain the development of the GTS project, which is necessary to ensure that Guyana utilises the gas which is produced during oil production and which is not being injected back into the wells. Guyana can acquire the skills that it needs to manage the oil and gas sector but it has to be wary of employing political acolytes and favoured friends in the task of building such capacity.
In tomorrow’s column, I will discuss the other two criticisms of the gas-to-shore project.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)