Feb 14, 2021 News
By Kemol King
Kaieteur News – Senior Minister in the Office of the President with responsibility for Finance, Dr. Ashni Singh, on Friday presented the 2021 budget for Guyana at a whopping $383.1 billion, but with no changes in the vision of the People’s Progressive Party/Civic (PPP/C) for the oil industry. The budget effectively builds on the promises made in the manifesto the party used to contest the 2020 general and regional elections. These promises are largely based on capacity building for monitoring agencies. The budget stays true to the inaugural speech made by President, Dr. Irfaan Ali, the day before, which made no promise to renegotiate the controversial Stabroek block production sharing agreement (PSA) or to secure unlimited liability insurance for Guyana in the case of large scale oil-related disasters, such as oil spills.
Called ‘A Path to Recovery, Economic Dynamism and Resilience,’ Budget 2021 mostly shies away from mentioning oil, other than to emphasize that the immense focus being placed on the development of other sectors is to ensure that Guyana avoids falling prey to the resource curse.
“We will remain ever mindful,” the Minister told the National Assembly, “of the need to avoid the pitfalls that have beset many new producers of oil and gas and many resource rich countries, including Dutch Disease.”
In economics, the Dutch Disease is a tendency of resource-rich countries to fail at prudently managing their economies due to a decline in most other sectors, brought on by an over-reliance on the resource sector(s).
The government does not intend to make any major interventions in the management of the oil and gas sector to curb or curtail the aggressive development plans of ExxonMobil and its partners. Dr. Singh said, like Vice President, Dr. Bharrat Jagdeo has, that the administration favours aggressive exploration for and production of Guyana’s oil, to beat the global transition to renewable energy sources.
“The window of opportunity for the extraction of this resource is finite,” he said.
The government intends to create an environment which adheres to international best practices for the running of the oil industry.
“Since we assumed office,” he said, “we have come to find that the capacity for management of the oil and gas sector remains severely underdeveloped to ensure that resource extraction is efficient and profit share is maximised. The previous government appears to have spent the last five years wasting time instead of ensuring that every opportunity was aggressively pursued to expeditiously equip our regulators to effectively safeguard our national patrimony.”
The following paragraphs effectively sum up the PPP/C’s plan for the petroleum institutional and regulatory framework in 2021.
Dr. Singh said, “Mr. Speaker, Government is working to create a strong and robust institutional and regulatory framework to better manage activity in the sector, including: amending the Petroleum Act; developing a model Petroleum Sharing Agreement; exploring a revised petroleum fiscal regime; advancing the draft local content policy and associated legislation; and advancing the Petroleum Commission Bill.
Commensurate with this outlook is the inevitable developing of technical capacity, strengthening of institutions associated with the oil and gas sector and the collaboration with experts to achieve the most optimal outcomes. These include such agencies as the Guyana Geology and Mines Commission and the Guyana Revenue Authority (GRA), who need to be adequately equipped to discharge their respective responsibilities in the sector.”
The Senior Minister explored the government’s initiative for the development of the GRA’s capacity to monitor the oil industry, stating, “Mr. Speaker, the GRA has continued to build capacity to address the emerging and unique needs of the oil and gas sector. This has resulted in the establishment of a Customs Petroleum Unit (CPU) within the Customs, Excise and Trade Department and a Petroleum Revenue Department (PRD). Mr. Speaker it is imperative that the GRA’s capacity to monitor and audit the oil and gas sector be ramped up substantially. For the year 2021, training will be in the areas of ‘Interpreting and Analyzing Financial Statements,’ ‘Oil and Gas International Financial Reporting Standards (IFRS),’ ‘Cost Recovery Procedures,’ ‘Computer Assisted Audit Tools’ and ‘International Taxation.’ In order to effectively scale up GRA’s capacity in light of the current dynamics of the economy, the allocation provided is $7.1 billion.”
In addition, the Minister spoke about the PPP/C Government’s plan for making Guyana’s energy sector sustainable and reliable, which includes the proposed gas-to-shore project.
“Guyanese anxiously await the prospect of piping gas to shore to generate cheap and reliable energy to power industry and meet our growing demand for electricity. Conceptualised as a 210 km pipeline to transport natural gas from offshore Guyana, the gas to power project will be the trailblazer to advance Guyana’s path to domestic energy security within the next three years. This transformational project includes the establishment of a power plant to generate up to 250MW of power, the establishment of an industrial park, including industries to support our agricultural and manufacturing sectors and the creation of a local LPG plant to cater for domestic demand and export.”
Dr. Singh referred to the commencement of procurement for consulting services for several studies which will inform the development of the gas-to-shore project. These were mentioned by the Vice President during a press conference last Tuesday.
“As we speak,” Dr. Singh said, “consulting services are being procured to conduct the geotechnical, geophysical, environmental impact, and Light Detection and Ranging (LIDAR) studies to determine the location where the gas line would land as well as the sites for the drying facilities, co-generation plant, and essential petrochemical industries. The construction of the co-generation plant and laying of the pipeline will begin next year and finish during 2023.”
He expects that when the plant comes on stream, the electricity cost will be significantly lower than the current rate. The administration also expects that the reduction in electricity cost will attract large industrial, agro-processing, and manufacturing firms.
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