Guyana & Climate Change
Guyana is preparing for the 2021 United Nations Climate Change Conference, known as COP26. It intends to propose a new Nationally Determined Contribution (NDC). The Paris Agreement on Climate Change requires countries to submit plans for climate action to reduce greenhouse gases and increase renewable energy.
This is key for Guyana as it faced severe flooding, due in part to rising sea levels, and also because of its prominence as a major oil-producing country. President Dr. Irfaan Ali noted that Guyana is committed to providing leadership via its Low Carbon Development Strategy. The initial Low Carbon Development Strategy promoted preservation of Guyana’s jungles that in turn contributed to global warming mitigation.
U.S. President Joe Biden has correspondingly committed $11 billion in helping developing nations address climate change.
Guyana’s energy resources have been in the international forefront in recent years. In the past year, high-ranking U.S. officials visited Guyana to open doors for American investors. Mark Cuban, of the Dallas Mavericks and Shark Tank, even sent his team on a private jet. The details of that trip weren’t released but it likely relates to the international interest in securing deals in the country now as there is an expected oil boom in the upcoming years.
This article provides a brief history of Guyana and summary of its oil industry.
History of Guyana
Guyana is located on the northern tip of South America, between Venezuela and Suriname, and north of Brazil. The Caribs, Akawois, and Arawaks were the most populous and most powerful natives, known as Amerindians. The Dutch were the first Europeans to colonize the area. After that, there were shifts in the reign between the British and the French. Britain ultimately prevailed and ruled “British Guiana” (as Guyana was known during that time) for over a century.
The British colonized Guyana in order to capitalize off of its sugar. To do this, they first enslaved Africans to labor in the fields. The British ended slavery in the 19th century and replaced it with a system of indentured servitude. The British began importing Chinese laborers for a short period and eventually began importing Indians. The Indians were told that they would work for a certain period of time and then return home to India. In reality, the inhumanity of indentured servitude was nearly similar to slavery. After importing hundreds of thousands of indentured workers to Guyana, the British ended this system because it was no longer profitable. Many Indians remained and formed the majority of Guyana’s population.
One lasting effect of British reign was that it created and promoted racial tensions between Africans and Indians.
There are oil reservoirs all over the world but several of the largest known reservoirs are in the Middle East and the United States. ExxonMobile, America’s largest oil company, initially discovered crude oil off of Guyana’s coast in 2015. Since then, there were 16 extraordinary oil finds. Five of the six largest oil discoveries in 2019 were in Guyana.
On June 27, 2016, Guyana and Exxon entered into a new deal, the Stabroek Block Production Sharing Agreement, concerning the Stabroek oil block. The deal is arguably to Guyana’s extreme disadvantage because it precluded Guyana from receiving $55 billion dollars in profit. This estimate, by OpenOil, is based on similar contracts within the industry. Guyana is only receiving 52% of revenue compared to 73% that other similarly situated countries are receiving in oil deals.
Exxon claims that the deal was based on Guyana’s status as a new frontier rather than a mature area with a lower risk, and the border dispute with Venezuela. Their stance has been criticized since Exxon announced a massive find only 3 days after signing. If the evidence was revealed sooner, Guyana would have had a stronger bargaining and negotiating position.
As for the specifics of the Stabroek deal, Exxon is paying $1 million per year to lease the oil block, and $600,000 per year to promote employment, environmental, and social development in Guyana. Exxon also paid an $18 million signing bonus.
Exxon’s Country Manager, Alistair Routledge, stated: “Guyana is one of the better opportunities for us in the ExxonMobil portfolio (but) it is not the only one. And indeed, if we don’t get the agreement as we are looking for on Payara (the company’s third Field Development Plan), the investment money will go elsewhere in ExxonMobil’s portfolio.” Such comments were likely made to intimidate Guyana and prevent it from renegotiating the Stabroek PSA.
Nevertheless, oil is not Guyana’s only emerging resource as it is exploring water hydropower and solar power projects.
The PPP previously championed the Amalia Falls as part of its hydro-energy mix. The project ceased when the APNU-AFC won the election in 2015. Now that the PPP is back in office, Vice President Jagdeo has clarified that the Amalia Falls hydro project and other waterfall projects will be reviewed for feasibility. If successful, the Amalia Falls project would result in the first and only indigenous community (Kato) to be powered by 100% renewable energy.
An energy panel also recently opined that solar/wind power would be the most cost effective resource.
Altogether, Guyana is encouraged to renegotiate the Stabroek PSA with Exxon in order to receive fair terms that were precluded at the time of signing. Guyana should not succumb to pressure from the oil magnate as it could receive terms in accord with industry standards or explore its renewable energy projects instead.
Melissa D. Goolsarran Ramnauth, Esq. is a trial-winning business and trademark attorney. She primarily helps new and small businesses with trademarks, formation, and name clearance searches. She writes articles on the importance of trademarks, trademark law updates, and also West Indian history (with an emphasis on India, Trinidad, Guyana, and the United States).
MDGR Law, P.A.
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