A question of 20 billion dollars

QUESTION FOR GUYANA: How to live in wealth
If the government manages the resources well, every Guyana will benefit from better schools, healthcare institutions, roads

Downtown, Georgetown, Guyana, South America

Guyana is a large, aquatic wildlife with only three paved highways. There are several earthy roads between the village by the river that screams through the rainforest. Children in remote villages go to school by canoeing and play naked in the heat.

On the coast there are backward, twisted cities like Georgetown, a capital city that is pervaded by channels that were first built by Dutch settlers and African slaves. The electricity network is so unreliable that electricity shortages are regular in cities, while much of the interior does not have electricity at all.

This unusual environment could become the next big oil producer.

In the last three years, ExxonMobil has made eight wells on the open sea. The potential to extract oil worth twenty billion dollars annually by the end of the decade would mean that there will be enough money to change the lives of almost all Guyans. One of the poorest countries in South America could become one of the richest. Suddenly in Georgetown began to talk about a sovereign foundation that would manage all that money, as is the case with the reign of Sheikh in the Persian Gulf.

But countries that discover oil often lose their chance because resources fall into the hands of a corrupt minority. Countries with weak political institutions like Guyana are particularly vulnerable.

You have all that money and power in the hands of the state, which means the party in power controls resources,” says Floyd Haynes, a financial consultant at the Ministry of Business who was born in Guyana. “And that money is usually spent, misused, or simply stolen.

Officials have no experience in regulating a large oil industry or negotiating with international companies. The public sector is corrupt and the private sector slowly accepts innovations, say businessmen and government assistants.

Nevertheless, optimism exists.

We look at this oil discovery as a providence,

says Rafael Trotman, Minister of Natural Resources.

We got a second chance to do some things right.

The first opportunity was independence from Britain in 1966, but ethnic tribal politics produced a fragile state with the economy triggered by narcotics trafficking, money laundering and the smuggling of gold and diamonds. Most educated young people emigrate to the United States or Canada, and those who remain face high rates of HIV infection, crime and suicide.

The challenges are huge and should not be underestimated,

says Lars Mangal, President of the Totaltech Oil Service, a Guyana training company for local workers.

We must overcome nepotism, the belief that someone owes someone, corruption, cynicism and skepticism.

The government of Guyana, in agreement with Exxon, will receive half of the money from oil production when the company’s payroll costs. Economists say that this means that the current gross domestic product of 3.6 billion will triple over the next five years.

But with excavations 190 kilometers away from the coast and without a planned refinery, economic benefits for the population are so limited that some have become cynical. Only 600 Guyans found direct employment on oil wells, in coastal bases and offices, and this number could rise to a maximum of 1,000 places.

‘Mathematics is here’

Picturesque Hindu monuments overwhelm the Guinean rice fields as a reminder of the cultural distance of this country and its Latin American neighbors. In Guyana, English is spoken as a legacy of British rule, and the two largest ethnic groups are Africans and Indo-Americans-descendants of slaves from Africa and slaves brought from the Indian subcontinent in the 19th century.

The country traditionally changed its crop of rice for oil from Venezuela. Now it comes with experienced Texas oil companies like Doug McGee, Exxon’s operations manager in Guyana. Working for the past 37 years for ExxonMobil, McGee was on the oil fields of Angola, Kazakhstan and Equatorial Guinea. In all these places, the oil wealthers came to the top, leaving the poor at the bottom. But while overseeing operations on Noble Bob Douglas, he insists Guyana will be different.

“Mathematics is there,” he says, adding that the country has a small population – below 800,000 – which will share a new wealth. The government of Guyana will take six billion dollars a year in the name of representation and tax until the end of the year 2020, according to the Norwegian consulting company Rystad Energy.

If the government is managing resources well, every Guyana will benefit from better schools, health facilities, and roads,

McGee said.

It’s not a bit “if”. The Guyana just need to look at neighboring Venezuela and see a failed state where the world’s largest oil wealth has not prevented misery and misery.

Near Trinidad and Tobago is another example of how oil-dependent countries can neglect traditional industries and then undergo a serious economic shock when prices of crude oil and natural gas fall.

Experts call this syndrome “the curse of resources.”

There are some positive examples. Malaysia, with large-scale oil production on the high seas, has maintained a diversified economy that flourishes. In the Middle East, Oman is an example of how to use oil and gas wealth to modernize the economy.

But there are many negative examples.

According to Prime Minister Mozes V. Nagamoto:

We are all concerned about the negative.

Discovery that ‘changes the game’

Before the recent breakthrough, many oil companies dug over 40 oil wells near the coast of Guyana and the nearby Surinam from the sixties of the 20th century. They were all dry or not economically promising. But with a jump in oil prices a few years ago, Exxon and Royal Dutch Shell tried again. (Shell left off later.)

Exxon’s main geocenter is Kerry Morland of Oklahoma. Recalling the three years ago when she decided to leave a business meeting in Georgetown to visit the oil platform, she said that there was no more than 20 percent chance that a significant amount of oil would break off from a depth of five miles below the ocean floor.

When her helicopter landed on the platform, the drill went into the oil tank. When parts of the stone surfaced a few hours later they were soaked with oil.

At that moment, I thought: ‘Oh God, we found something,

said Morland.

This could change the game in this country, one of the poorest in the western hemisphere.

Exxon began punching the first of 17 wells that will begin to pump oil 2020, and floating production, warehouses and a vessel will be able to get 120,000 barrels a day.

There is another vessel in the plan, and perhaps the third one. All in all, 500,000 barrels of oil a day could be produced in the next decade.

It was delighted by workers on the Noble Bob Douglas, whose revenue grew.

Gorshum Inis, a 25-year-old deck cleaner, works on a crane that raises pipes for a new well and earns more than a tractor. He says he now has enough money to visit his parents and younger brother in New York and plans to build a house for himself and his daughter.

I am proud to be one of the pioneers of this great moment for Guyana,

he says.

I see Guyana as the new Middle East.

‘In the mouth of the jaguar’

Environmentalists are concerned that oil will prevent the development of renewable energy and that governments and oil companies are not prepared for eventual discharge.

We have two more years left till the first oil and we still do not have a national disaster plan,

said Anette Arjun-Martins, chairman of the Guiana Marine Conservation Society.

Our hands are in the mouth of the jaguar.

Arjun-Martins says the government’s Exxon agreement did not detail the company’s responsibilities in the event of a spill. But government officials state that under state laws companies will be held accountable. Exxon’s officials say the company is doing everything that can reduce the risk of spillage. The company has a technique to pick up the leaked oil and urged the authorities to use chemical disposers in the event of danger in order to pick up the oil that leaks out.

Exxon will map coastal mangroves and explore the migration routes of fish, birds and turtles to set priorities in case of need for cleaning. They also plan to build a gas pipeline to the coast that will be used instead of oil used by power plants, thus reducing the price of electricity for consumers.

We are committed to the development of these resources in the most responsible way and with a minimal impact on the natural environment,

said Rod Henson of Exxon.

‘A lot of red flags’

President Guyana David Granger, a retired military commander at the head of a divided coalition, is seeking to establish legal frameworks for the upcoming bonanza. In order to avoid corrupt officials, Granger announced that he plans to set up an energy department to suit the president and an independent commission that will regulate the industry and issue exploration and production permits.

Under pressure to break the past secret deals with international companies, Granger announced Guyana’s contract with Exxon at the government site in December, triggering a fierce debate on the terms of the deal. He promised to break off with a policy of secret bidding for drilling rights and to organize open auctions for further development.

Many changes have been proposed by Jan Mangal, Granger Oil Adviser and brother Lars Mangal, a businessman. Former Chevron project manager Jan Mangal, who was born in Guyana, advised the president to postpone a new lease until the oil commission was established and asked for an investigation into all oil concessions that the previous government had given to smaller oil companies.

I see many red flags,

says Mangal.

We can not allow the Guyana industry to be built on the harsh basis of corruption.

Newel Denison, chairman of the Guyana Commission for Geology and Mining, says that he and everyone in the government are under pressure to do things right.

Of course I worry,

he said.