Viewpoints on Energy, Geopolitics, and Civilization
Mac Margolis/Bloomberg: Guyana's Oil
Boom May Incite Its Cultural Tensions
Change is coming
Even as more Guyanese identify as racially mixed,
its politics are not, with ugly consequences for development.
This time last year, Guyana's future looked bright. The first oil from the Western Hemisphere's biggest new find in decades was ready to flow. The economy was on track to expand by 86% in a year and, soon enough, transform one of the poorest countries in the Americas. Even corruption, Guyana's legacy scourge, seemed to be somewhat in retreat .
Instead, 12 months on, this small nation of 750,000 people on South America's northern rim is reeling. The March 2 presidential election, a shambles that took five months to settle, left traditionally feuding elites more deeply divided by racial and ethnic loyalties. The political turmoil has imposed costly setbacks for oil extraction and exploration and made investors uneasy. Institutions vital to managing the geyser of oil revenue remain flimsy, where they exist at all. And all this has unfolded amid an international oil glut and the coronavirus pandemic.
This tale looks familiar. Frontier oil nations too often are easy marks for the resource curse, under which the sudden gift of a bounteous natural asset subverts national institutions and blights politics and society. Yet Guyana is a reminder that the hex can work both ways.
Cronyism, graft and self-dealing have long made Guyana's identity-riven politics a race to the bottom. 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.
Undoubtedly, getting blindsided by plenty can be problematic. “The nation's ports, power supply, supply bases — all are rudimentary and industry in Georgetown is basic at best,” said Marcelo de Assis, head of upstream research at Wood Mackenzie, an energy consultancy. Yet Guyana's race-fueled partisan strife adds a toxic twist. “One of the worst circumstances you can have is a country polarized politically and ethnically that is about to be awash in a huge amount of money,” said Francisco Monaldi, an oil and energy expert at Rice University's Baker Institute for Public Policy.
Start with the no-confidence vote against President David Granger's government in late 2018, which threw the system into turmoil. Instead of a smooth segue to new elections, as the U.K.-inspired constitution prescribed, Guyana got a 19-month political stalemate: Granger appealed to the courts, demanded an election recount and then challenged the international auditors who validated the balloting. Making matters worse, the electoral quarrel was cloven along centuries-old fault lines: Guyanese of African descent lined up behind Granger's outgoing People's National Congress while Indo-Guyanese descended from indentured servants hewed to the ranks of the rival PPP party, now back in power under President Irfaan Ali.
Oil majors are no strangers to turbulent markets: Look at Angola and Chad , where the crude kept flowing through ethnic animosities and civil wars. However, the disarray in Guyana has given investors pause and threatened production setbacks. A likely 12-month delay on the Payara oil development in the prized Stabroek block could cost Guyana around $1.6 billion . Adding to the murk are suspicions that sticky-fingered officials gave away oil concessions in 2016, shortly after Guyana's fabulous oil find.
Those claims were bolstered earlier this year when Global Witness, an industry watchdog, accused Exxon Mobil Corp. of imposing an “abusive” production-sharing agreement, which it said could shortchange the country by around $55 billion — around 12 times Guyana's gross domestic product in 2019. Guyanese authorities and Exxon denied any undue advantages, arguing the terms of the agreement reflected the risk of operating in a frontier hydrocarbon province .
Public misgivings over the contracts have triggered demands that the government renegotiate them. Perhaps more important, however, Guyana should get its own house in order. “Guyanese youth is the key. I say forget about local content and oil and gas jobs for the moment. We need to build a country from scratch. There's so much work to be done,” Guyanese oil expert Jan Mangal, who advised the Granger administration but has been critical of both competing factions, told me. Instead, Mangal added, “we have all the red flags.”
Transforming Guyana ultimately depends on solving a bigger riddle: Can the country kick the habit of incapacitating rivalries based on skin color and cousinry? While Guyanese of Asian and African descent have lived side by side for centuries, “they mix but they do not combine,” said Christopher Charles, a professor of psychology at the University of the West Indies, in Jamaica. “Indians and Africans see themselves as locked in a zero-sum game for power.” The struggle for power and influence has turned diversity into enmity, now aggravated by the prospect of fabulous oil rents. “Given its access to resources and gateway location to South America, Guyana could be a little Singapore by now. Instead, the politicians have used race to stay in power,” said Mangal.
Guyana has made some strides in overcoming its dysfunctions. Transparency International recently rated Guyana as one of the most improved nations on its annual Corruption Perceptions list, ranking 85 of 180 countries in 2019, (compared with 93 the year before). Racial tensions have generally not exploded into violence and, encouragingly, some parts of society also may already have bridged its atavistic cultural moats. The number of Guyanese self-identifying as racially mixed (20% of the total population) doubled between 1980 and 2012 (the date of the last complete census), the fastest growing demographic alongside those of Portuguese ancestry.
A longtime expatriate aid official in Georgetown — who works with all Guyanese groups and so asked not to be identified — recalls throwing a house party during the 2014 World Cup and being surprised at the easy interaction among the diverse guests. “I had a big crowd with many mixed couples. It was all very natural. I realized then that Guyana had changed for the better,” the official told me. “I hadn't noticed because I'd been living in my bubble.”
Sadly, half a century after independence, politicians are still living inside of theirs.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Mac Margolis is a Bloomberg Opinion columnist covering Latin and South America. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.” Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld.
Editor's Note: This article was originally published by Bloomberg on September 01, 2020. All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld.
We invite you to join us as a sponsor. Circulated Videos, Articles, Opinions and Reports which carry your name and brand are used to target Entrepreneurs through our site, promoting your organization’s services. The opportunity is to insert in our stories pages short attention-grabbing videos, or to publish your own feature stories.
All works published by Petroleumworld are in accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.Petroleumworld has no affiliation whatsoever with the originator of this article nor is Petroleumworld endorsed or sponsored by the originator.
Petroleumworld encourages persons to reproduce, reprint, or broadcast Petroleumworld articles provided that any such reproduction identify the original source, http://www.petroleumworld.com or else and it is done within the fair use as provided for in section 107 of the US Copyright Law.
If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. Internet web links to http://www.petroleumworld.com are appreciated. Petroleumworld Copyright© 1999-2020 Petroleumworld or respective author or news agency. All rights reserved.
We welcome the use of Petroleumworld™ stories by anyone provided it mentions Petroleumworld.com as the source. Other stories you have to get authorization by its authors. Internet web links to http://www.petroleumworld.com are appreciated.
Petroleumworld welcomes your feedback and comments, share your thoughts on this article, your feedback is important to us!
Petroleumworld News 09 07 2020
We invite all our readers to share with us
their views and comments about this article.
Send this story to a friend
Write to firstname.lastname@example.org
By using this link, you agree to allow PW
to publish your comments on our letters page.
Any question or suggestions,
please write to: email@example.com
Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8 +/ 800x600 pixels