Aug 09, 2022 News
By Kiana Wilburg
Kaieteur News – Cognizant of the need to strengthen Guyana’s capacity to manage the oil sector, the APNU+AFC faction had taken several loans and grants from international lending agencies during its time in office.
In December 2018 for example, it borrowed a US$11.6M loan from the Inter-American Development Bank (IDB) to support the development of the oil and gas sector as well as the development of cleaner energy sources for electricity generation.
One of the specific objectives of this loan focused on the establishment of Oil and Gas Depletion Policy Guidelines. This mechanism is often considered a necessary tool in the governance framework for inexperienced oil producers with significant oil and gas resources. Though those guidelines were completed in keeping with international best practices, it was wholly rejected by the People’s Progressive Party/ Civic when it assumed office in August 2020.
In Guyana’s case, the guidelines which were prepared by the IDB in collaboration with the APNU+AFC regime sought to arm the country with standards it can use on setting the right time/pace at which production of oil resources must take place. The bank reasoned that setting the correct pace of extraction and development helps Guyana to optimally reap the most benefit from its resources. By determining and moving at the right pace, the country allows itself enough time to put the most effective monitoring systems in place and build capacity needed to handle the complexities of regulating and auditing an oil industry.
The guidelines therefore inherently ensure optimal extraction rate that maximizes resource use, economic value, and national development policy outcomes.
Kaieteur News understands, following a perusal of the Project Completion Report (PCR) for the loan, that these guidelines were completed and in place for the PPP/C Government to use way before the 2020 General and Regional Elections were completed. It was actually in place, waiting to be utilized since December 2019.
Since assuming office however, the PPP/C Government has taken the decision to not make use of the guidelines in its entirety. Vice President, Dr. Bharrat Jagdeo and President, Dr. Irfaan Ali have argued that they want ExxonMobil and partners to accelerate oil production in the Stabroek Block. Both have articulated to the citizenry that Guyana has a short window within which it can get the most bucks for its oil barrels as the world will look to rely more on renewable energy sources to a significant degree by 2050.
Industry stakeholders have however expressed their disagreement with this approach, stating that Guyana’s sweet, light, crude will be needed beyond 2050, and therefore, authorities would do well to implement a depletion policy to pace itself. Local activists have also argued that Guyana should have a policy in place to give itself breathing space to build the necessary skills and capacities to manage the sector; otherwise the risks are even greater for economic loss as well as environmental damage.
The government has disagreed with the foregoing arguments, contending that its approach is in the best interest of the country.
OTHER UNDERUTILIZED LOANS
This IDB loan is not the first to be underutilized. Kaieteur News previously reported that the PPP/C Government has also placed a US$20M World Bank loan on pause.
That money was approved on March 29, 2019 for the Guyana Petroleum Resources Governance and Management Project (GPRGMP). The programme’s objective is to ensure the enhancement of legal and institutional frameworks and the strengthening of the capacity of key institutions to manage the oil and gas sector.
The financial institution said in a report that the project’s overall implementation has been downgraded to ‘Moderately Unsatisfactory’, with around 24% of the total credit disbursed and no disbursement requests received by the Bank since the second quarter of 2021.
The bank in its report said that the government has indicated as recently as late December 2021, its intention to “refine the scope of the project to bring it in line with current government priorities.” That process is still ongoing.
This newspaper also reported that a US$1M grant from the World Bank to strengthen the monitoring capacity of the Environmental Protection Agency (EPA) was also underutilized. This programme had, for example, set the stage for the regulator to be armed with a 34-member unit of oil and gas experts including highly specialized and experienced petroleum, geological and environmental engineers. This, among other objectives under the grant, are yet to materialize.
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