I took part recently in the fourth annual Aberdeen Guyana Gateway event hosted by Granite PR, Brett Jackson’s public relations firm, which brought together some of the key players in that country and its developing oil industry.
My interest in Guyana is very much long distance and is based on the fact it has the potential, one way or another, to be the classic case study of how and whether a small, poor country can come to terms with the sudden arrival of the international oil industry.
There is no shortage of precedents to that question and the answers have not always been encouraging. However, the dichotomy between size of population and scale of resource is probably unique to the case of Guyana.
There are just 750,000 people in Guyana and a reasonable share of the wealth that is about to flow from their waters could give all of them a comfortable, peaceful life for generations to come, with quite a bit to spare.
That’s the optimistic vision and it was much in evidence during these two days of discussions. There is a keen awareness of the need to build local supply chains and also to partner with foreign companies which have relevant experience – a clear opportunity for the UK given historic links.
There could hardly fail, equally, to be a keen awareness of how things could go horribly wrong with the blessing becoming a curse. One does not have far to look for the example of how oil wealth can heighten inequality rather than eliminate poverty. Neighbouring Venezuela has had oil for more than a century and little good it has done the impoverished masses.
I listened to my fellow-speakers with a degree of optimism and the event was agreed by all to have been valuable and informative. Aberdeen has twinned with Georgetown and is absolutely right to do so. The lessons to be learned from how the north-east turned the North Sea industry to its advantage are as helpful as they are likely to find.
Where optimism arises, a corrective soon corrects itself. This came in the form of an article written for Bloomberg by a veteran Latin American specialist, Mac Margolis, who feared that the divisive nature of Guyana’s politics, based on ethnicity, was already threatening to turn opportunity into disaster.
“Cronyism, graft and self-dealing have long made Guyana’s identity-riven politics a race to the bottom,” he wrote. “Unless Guyanese society holds its carping political establishment to a higher bar, South America’s breakout nation risks sabotaging a centuries-deferred vision of creating common wealth and democratic stability, and instead enriching only the oil behemoths”.
In support of this warning, he pointed to a report by Global Witness, an industry watchdog, which accused Exxon Mobil of imposing an “abusive” production-sharing agreement, which it said could short change Guyana by around $55 billion — around 12 times its gross domestic product in 2019.
That was in January. In February, Global Witness withdrew their report on Guyana, titled “Signed Away”. In a somewhat convoluted explanation of this volte face, they said that they “stand by the integrity of the evidence we presented” while recognising that there were factors they had failed to take account of – like the price of oil and rates of extraction “which led us to overestimate the potential economic benefit” to Guyana.
Organisations like Global Witness do not like to admit the possibility of error so it can be assumed that this rapid pull-back resulted from some pretty persuasive evidence being drawn to their attention. And it is possible that their starting point was a mind-set that it was an absolute certainty Exxon would have run rings round a country of 750,000 people.
On balance, I prefer to take the optimistic view – that Guyana is capable of coming to terms with its extraordinary new wealth, but also that it needs external assistance to do so. And that is where the UK should surely be re-thinking its position on the ludicrous prohibition on support from the Department of International Trade for companies in the oil and gas sector, in which it has been followed by the Scottish Government.
Guyana’s oil industry is not going to shut up the shop it has just opened any time soon. If British companies and institutions do not give the industry the support and massive experience they can contribute, then others will fill that void – perhaps with less regard for the regulation, environmental and transparency standards by which our companies are bound by law. We should be pro-actively encouraging involvement in Guyana at this stage, not obstructing it.
There is another reason for this. Guyana has been going through terrible flooding. It has been in the front line of dealing with the impacts of climate change. Much of the money that comes from oil will be used to fund its own energy transition to renewables. Should we not also be involved in all of that?
For the time being, outsiders can only hope that oil becomes a net blessing rather than a curse for Guyana. However, there is no need for Aberdeen, Scotland or the UK to be bystanders in that contest.
Brian Wilson is a former UK energy minister