Latest update April 25th, 2024 12:59 AM
May 15, 2022 News
– Why is Govt. so eager to create one when it failed to implement many prerequisites for success? – Dr. Jan Mangal, Oil Consultant
By Kiana Wilburg
Kaieteur News – Former Oil Advisor to Guyana and International Consultant, Dr. Jan Mangal does not agree with the government’s possible pursuit of a National Oil Company (NOC).
In a written contribution to the Energy Advisor (an online platform which features fresh analysis from business leaders and government officials on a range of issues), Dr. Mangal said there are numerous reasons why Guyana should not develop a NOC in the short-term, or even over the long-term, due to the climate crisis.
The consultant argued that developing a NOC would be putting the cart before the proverbial horse. Dr. Mangal said, “Guyana failed at most prerequisites for a successful industry. And I define success as an industry that benefits the people and future generations, and does not only benefit the oil companies, local business elites and politicians. Success also requires an industry that recognises its impact on the climate and constrains production.”
The former Presidential Advisor added, “Guyana failed to negotiate fair oil contracts even when it had complete leverage over ExxonMobil in 2015-2016. Guyana failed to award oil blocks in a transparent public manner and in ways to maximise revenues for the country. After seven years, it still failed to develop the human and organisational capacity to negotiate, regulate and manage the industry, and it failed to develop the basic laws, and also to protect its environment.”
Additionally, he said Guyana has not even started to consider and mitigate the very difficult issues associated with the so-called ‘Dutch disease’ and the resource curse, and has not embarked on sustainable/inclusive national development.
Dr. Mangal said the only positive step seen in Guyana was the publication of the oil contracts in 2017. Dr. Mangal said, “To now focus sparse resources on creating a NOC is unwarranted and unjustified, and one has to wonder why the government is so eager to create a state-owned company when it was incapable of completing many prerequisites for success.”
Dr. Mangal’s advice is also similar to that of the International Monetary Fund (IMF). Back in 2017, the financial institution categorically stated that there is no business case for such an institute here.
In one of its analytical reports, the financial institution noted that many countries have a NOC which allows the government to participate in the block like an investor would. The IMF said that this move also allows the government to have a “seat at the table” for decision making.
The Fund noted, however, that given the substantial regulatory powers the government can have over the upstream petroleum sector, it is not evident that participating would necessarily be adding much more value.
Furthermore, the financial institution warned that participating interest by government requires it to contribute to handling a portion of the costs, including in the development phase of the oil block. It was keen to note that the government can raise its own money to handle those expenses, or it can lean on the operator and repay the oil company with interest. The Fund noted that the latter option delays the receipt of any major benefits for the government.
As such, the IMF said that the government may be better off securing a higher government take in the contract itself.
Vice President, Dr. Bharrat Jagdeo has since made it clear that the IMF does not have the country’s interest at heart; therefore, it is the government that will decide what will be the best way forward on this subject.
Dr. Jagdeo had said a decision would be made by September, the same time the country is expected to enter its first action of oil blocks.
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