With Guyana on track to be the second or third largest oil producer in the Western Hemisphere, US Ambassador Sarah-Ann Lynch says the country has to advance from being a raw material so as to avoid the dreaded resource curse and she also stressed that contracts have to be honoured and that the government is accountable to all of the people.
In a wide-ranging address to the virtual Guyana Oil and Gas Summit on Wednesday, Lynch stressed that the US is committed to Guyana’s political stability and that its stance this year during the election period “should not leave any doubt that we take our values – fairness, transparency, accountability, and the rule of law – seriously”.
Lynch’s reference to honouring contracts will likely be seen as encompassing ExxonMobil’s highly controversial 2016 Production Sharing Agreement.
She cited the need for regulatory reform, bolstering the energy grid and diversification in the energy sector while lamenting that the cost of energy here is one of the biggest obstacles to investment.
With a new government in place, she said that Guyana knows that it will have to “move quickly in order to show both its citizens and the world that it is ready for the immense transition underway. It will have to make significant outlays in its power generation sector in order to attract the types of investment that will make it a sought-after destination in the Caribbean”.
Lynch also adverted to the series of major infrastructural projects planned by the government including the new bridge over the Demerara River which she suggested would cost around US$150m. The government has not provided an estimate of the cost of the bridge.
She said that it will be crucial for the government, its international partners, the private sector and civil society to “get it right”
She said: “The need for modern legislation and regulations that reflect those values is paramount to continue along the road toward prosperity for all Guyanese. The Guyanese I’ve spoken with, from all walks of life and all demographics, want a peaceful and prosperous country for their children to grow up in. They want a secure and stable region. And who doesn’t want those things? They are what everyone deserves, regardless of race, religion, sexual orientation, ethnicity, gender, or disability, it doesn’t matter. These are things that Guyanese citizens deserve, and that is what the United States stands for in our partnership with all of you”.
The text of the Ambassador’s remarks follows:
Remarks as prepared
Ambassador Sarah-Ann Lynch
Guyana Oil & Gas Summit (Virtual)
December 2, 2020
It is my distinct honor to speak to you today, on behalf of the U.S. Embassy, at the Guyana Oil & Gas Summit. I thank the Georgetown Chamber of Commerce and Industry for its partnership in this event. To all participants, including Ministers, members of the private sector, Chambers of Commerce, other diplomatic missions, ladies and gentlemen, welcome. This summit is an important event given the role of oil and gas in the future of Guyana, and indeed the future for the region. As the U.S. Ambassador to Guyana, my goal today is to share with you the U.S. viewpoint on the opportunities that exist in Guyana’s energy sector, and to highlight the opportunities for collaboration between Guyanese and U.S. companies that is already happening. The ties between our two countries are strong, and it is my job, and the job of the Embassy, to work hard to reinforce those ties for the mutual benefit of both countries and for the region.
I don’t have to delve too deeply into how much opportunity there is in Guyana. The IMF projects Guyana’s economy will grow by 26.2% in 2020. In 2019 the country’s GDP was $4.2 billion and by the end of the year it is projected to grow to $5.3 billion, making it the fastest growing economy in the world.
Guyana is on track to become the second or third largest oil producer in the western hemisphere over the next 20-40 years. This truly is a unique situation: that a country of just 780,000 people discovers vast offshore deposits of high-quality oil, within five years begins extracting those deposits, and will – in short order – be mentioned in the same breath as Mexico and Brazil as the second or third largest oil and gas producer. Exxon’s discoveries in 18 of its 21 exploratory wells is incredible. The sheer number of oil barrel equivalents offshore – now 9 billion and still rising – is staggering.
And what does that mean? That means that Guyana is open for business. Obviously, the biggest draw is in the oil and gas sector, particularly in exploration and services. But there are also significant opportunities in the renewable energy, financial, construction, and agricultural sectors. Guyana and the private sector must capitalize on this. If Guyana can advance from being a raw material producer to exporting more value-added goods, it will capitalize on a needed diversification of its economy. This will enable it to avoid the dreaded “resource curse” that has plagued many developing countries with newly discovered natural resources.
And the United States is here to help. As part of Secretary of State Mike Pompeo’s historic September 17 visit to Guyana, Guyana signed onto the Growth in the Americas initiative. This agreement provides a framework to promote private sector investment in finance and procurement, infrastructure, and energy security. It will also lay the groundwork to implement global best practices in policy, legal, regulatory and investment frameworks. As part of this bilateral collaboration we plan to establish a Working Group with the Government of Guyana to develop the foundation for partnership in these key areas. Less than one month after the Secretary’s visit, a six-agency delegation led by the International Development Finance Corporation, or DFC, came to Guyana further highlighting the U.S. Government’s support of economic growth and security cooperation in the region. This visit further illustrated our commitment. U.S. government officials met not only with Guyanese leaders but also the private sector, and outlined opportunities for U.S. government project financing through public private partnerships.
But this commitment is not new. The United States has a long history of working with Guyana to develop enabling environments for responsible development of energy resources. From 2010-2018, the Department of State’s Energy Governance and Capacity Initiative, or EGCI, supported Guyana’s government in its efforts to manage its upstream oil and gas sector effectively and responsibly. Even a decade ago, the Department of State recognized the need for the necessary regulatory, legal, and policy structures to ensure sound governance and sustainability in this sector. With EGCI assistance, we provided Guyana with international best practices in how to organize its energy sector and manage its revenues. With U.S. assistance Guyana was also able to initiate the process to join the Extractive Industries Transparency Initiative, EITI, to ensure the public knows where oil revenues are going.
With a new government in place, Guyana knows that it will have to move quickly in order to show both its citizens and the world that it is ready for the immense transition underway. It will have to make significant outlays in its power generation sector in order to attract the types of investment that will make it a sought-after destination in the Caribbean. One of the biggest obstacles is the cost of energy. Guyana’s energy generation is largely fossil fuel-based, with power plants utilizing heavy fuel oil. The cost of electricity is USD 0.32 per KWH, which is significantly higher than Guyana’s South American neighbors but about average for the Caribbean. Guyana also knows it will have to improve its power grid, which, unfortunately suffers from systemic losses. This is a major roadblock for the development of large industries now. If Guyana can take advantage of the natural gas that emits from the oil wells, it can bring down the cost of energy two-fold, which will make a difference in the lives of every Guyanese citizen.
Guyana is also working on reforming its financial sector to attract investment. The Minister of Legal Affairs committed to amend existing legislation to allow for the development and diversification of the existing financial sector. Guyana’s currency is stable and local banks are highly profitable and continue to grow. International companies will look for this stability and reform as they evaluate Guyana as a place to set up operations.
In addition to regulatory reform and improving the energy grid, diversification in the energy sector will help Guyana fulfill its dream of a green economy. The Ali administration committed to create an additional 400 MW of power generation within the next 5 years. The Minister of Public Works highlighted solar energy parks and micro-grids as a part of the Government’s plan for hinterland community development. The Guyana Energy Agency just signed a deal for two solar farms in Lethem and Bartica which will provide much needed energy for those areas.
Finally, there are a slew of large infrastructure projects the Government of Guyana intends to put out for tender in the coming weeks and months. The Ministry of Public Works has announced two large RFPs: a $150 million high rise, four lane, Demerara Harbour Bridge, and the construction of four international hotels. The Government is expected to announce tenders for new highway construction and road expansion projects, a gas to shore power generation plant in or near Georgetown, and a deep-water port.
These are all sweeping changes and it will be crucial for the government, in concert with international partners, the private sector, and civil society to get it right. The United States is committed to Guyana’s prosperity for all Guyanese, and our stance with regard to Guyana’s political stability over this past year should not leave any doubt that we take our values – fairness, transparency, accountability, and the rule of law – seriously. When you attract investment from U.S. partners, you get quality, you get sector specific experience, and you get a transparent deal. As Guyana moves forward on this oil and gas path, the perception that it holds these values in high regard makes a difference to U.S. investors and the international community. It is important that contracts are honored, laws are followed, reforms are real, and that the government is accountable to its people – all of its people.
The need for modern legislation and regulations that reflect those values is paramount to continue along the road toward prosperity for all Guyanese. The Guyanese I’ve spoken with, from all walks of life and all demographics, want a peaceful and prosperous country for their children to grow up in. They want a secure and stable region. And who doesn’t want those things? They are what everyone deserves, regardless of race, religion, sexual orientation, ethnicity, gender, or disability, it doesn’t matter. These are things that Guyanese citizens deserve, and that is what the United States stands for in our partnership with all of you.
Thank you for your time today, and I wish you a productive rest of the Guyana Oil and Gas summit. Thank you.