Guyana is on a fine line between its potential for economic growth through new oil developments and the risk of environmental degradation and sea level rise associated with fossil fuel-induced climate change. Guyana, a small South American country of just 800,000 inhabitants, rose to world fame last year with the promise of low-cost, high-yield oil operations in its newly established oil fields. Based on recent discoveries from ExxonMobil, TotalEnergies and Tullow Oil, Guyana is said to have 10 billion barrels of crude oil reserves.
With production starting up in 2019 and more and more discoveries over the past two years, Guyana’s energy future looks promising. One of South America’s poorest countries may soon become one of the richest countries in the world per capita whether the projections for its expected oil production are correct.
However, following the COP26 climate summit earlier this month, much of the world is focused on transitioning from fossil fuels to renewable alternatives, without investing in new long-term oil developments. And Guyana knows the effects of climate change all too well, having experienced severe flooding earlier this year that destroyed crops and homes. Georgetown, the coastal capital of Guyana, is at risk of being submerged over the next decade if sea levels continue to rise. So how will Guyana cross the line between developing its oil wealth and reviving the country’s struggling economy, while ensuring environmental stability?
The challenge facing Guyana could have a positive effect on the country’s new industry, with a major focus on the development of low carbon oil production. International and domestic players involved in new exploration and extraction projects are under pressure to meet international net zero targets. The country could follow the path set by Saudi Arabia, which promises to significantly reduce its carbon emissions while increase oil production over the next few decades.
Guyana recognizes the challenges it faces and has asked energy companies pumping oil in the region for assurances that the country will be protected from the spillover effects of production. The head of the Guyanese environmental agency announced that the country would ask oil operators to guarantee financial assistance in the event of an oil spill as well as the removal of disused oil infrastructure. Related: Granholm: Biden Has Even More Tools To Solve High Gasoline And Energy Prices
In talks with a national oil consortium, led by Exxon, Guyana is pushing for a deal to expand events covered by Exxon’s $ 5 billion self-insurance policy. If new legislation were passed, it would ensure that several oil operators in the Stabroek block cover the environmental costs associated with oil spills as well as the dismantling of oil platforms once the project is completed.
Guyana holds all the cards when it comes to oil production, as the world’s oil majors move away from high-carbon operations and focus on reliable new areas, where they can shape low carbon production in Africa and the Caribbean. This month, Exxon announced that it was in talks with Dutch entrepreneur SBM Offshore NV about the potential for a fourth multi-billion dollar production platform. Although production has already started under the terms of the existing deal, if the international oil majors hope to expand their operations in the South American country, they will likely have to agree to Guyana’s terms.
In addition to environmental challenges, if Guyana wants its people to support new oil developments, black gold revenues will have to flow more quickly. At present, the Guyanese population is seeing the demand for travel and accommodation increasing as prices across the country rise with increased demand. However, the average person has yet to see an increase in their income or other economic benefits in line with the new developments. Sharing wealth is vital for a country that, before the recent boom, depended heavily on fishing and agriculture, industries that are becoming increasingly complicated due to climate change.
Richard Rambarran, Executive Director of the Georgetown Chamber of Commerce and Industry, suggested that Guyana has the potential to become a high-income country over the next 30 years and a “southern hemisphere leader in sustainable development” if the revenues are reinvested in the country.
As one of the poorest countries in the world, it was inevitable that Guyana would respond to the influx of investment offered by some of the world’s biggest oil companies when they made huge crude discoveries. However, Guyana is seriously threatened by climate change, with many people in the country depending on the environment for their basic income. Over the next decade, as Guyana’s oil industry takes shape, it must demand low-carbon production from oil operators, as well as the assurance that they will pay for any damage caused by extraction and production. oil production. In addition, oil revenues could support sustainable development and increase per capita income if properly managed, making Guyana a sustainable example of an emerging oil nation.
By Felicity Bradstock for Oil Octobers
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