Inside, confidential and off the record
Guyana an opportunity
In an interview with DW, oil expert Lars Mangal explains why Norway is not a role model for Guyana.
"Guyana has a fantastic window of opportunity"
Guyana has no time to lose, says Lars Mangal. The Guyanese entrepreneur and oil expert that worked for 30 years for international companies such as Welltec and Schlumberger and now runs his own supply company Totaltec in Georgetown's elegant Subryanville district, where he recruits, trains and develops operational personnel for the oil business, constructs office &living accommodation, among other things.
Deutsche Welle: Mr. Mangal, Guyana is in the spotlight of the oil industry thanks to discoveries at sea. At the same time, however, there is a lot of criticism on the deals, which provide for the US oil company Exxon and Guyana to share the profits 50/50. In other countries like Mexico, the state retains 75 percent of the net revenue. As an expert, what do you think about this?
Lars Mangal: Many commentators have no idea what they are talking about and are lost in the trees preventing them from seeing above the forest. This is a fantastic opportunity and an excellent contract. It's good for Guyana, for the people and for Exxon.
What's good about it?
We now have the opportunity to change this country, to drive development, to modernize the economy and to lift every Guyanese household out of poverty. Exxon is one of the most capable oil companies in the world. We have a technologically complex offshore project here in Guyana that smaller companies couldn't handle at the pace required. Given the depth of the field (1000-3000 meters), extracting oil in Guyana is like landing on the moon.
But that doesn't change the unfavorable clauses in the contract...
Of course, as with all agreements, there may be room for improvement. The question is whether we have time to do so and will it create overall value. The global economy is transitioning from fossil fuels to renewable sources of energy. Fossil fuels are also being used less in electricity generation. The window of opportunity for Guyana is closing fast and the country must act with a true sense of urgency.
But oil also places a small country like Guyana at the behest of a large company like Exxon.
Exxon is a competent partner, and Guyana is now the crown jewel in Exxon's portfolio in view of the state of the international oil business and the great exploration success they have had in Guyana. Both parties have a stake in success here. It has to be looked at as a strategic partnership. The country has an unprecedented opportunity for a paradigm shift. But time is pressing. Our goal must be to produce 2 to 3 million barrels of oil a day as quickly as possible. Otherwise, there is a danger that we cannot benefit as a society from this resource.
Many states have already failed due to the "oil curse". One country that is repeatedly mentioned as a positive counter-example is Norway, with its oil fund. Is this also the model for Guyana?
Norway is an example, but it is not the model. Norway was a poor country with farmers and fishermen. The transformation did not only happen because of oil, but also because of good governance, democracy, government support for science, the obligation to use local labor and materials and the knowledge transfer to indigenous Norwegian enterprise. That is why there are so many Norwegians in the oil business today. But this has nothing to do with the oil fund that was created 20 years after oil was discovered. Nor is the oil fund a guarantee; it can backfire, if we look at Angola and Malaysia, for example, where the fund has been looted by the president's son & daughter or by politicians in other countries, partly with the help of international banks such as Goldman Sachs.
What could work then?
We should create a household fund in which every Guyanese is a stakeholder. That fund should receive 60-70% of the oil revenues. Each citizen can draw a certain amount of funds for house building, education or health. That way everyone can decide for themselves whether they want to build a house, utilize private health insurance and or send their children to private schools. This stimulates the construction sector and positive, constructive competition between the state and the private sector. This would really be a step towards modernization and poverty reduction lifting every Guyanese household out of poverty within a decade.
Are politicians up to the challenge?
Unfortunately, we lost a lot of time because our parliament was paralyzed for more than a year after a vote of no confidence in Dec 2018. In my opinion, what is important for development is a policy with a local focus, i.e. part of the materials and labor must be sourced and developed locally. After the next elections, politicians must overcome their divisions. The opposition and the government must agree on a binding long-term oil agenda. This is important so that the government sets the agenda in partnership with the oil companies. Guyana also needs to ensure good governance and accelerate marketing and exploration in other blocks where new opportunities contracting opportunities and models will emerge. The government of Guyana has lost 5 years in terms of institutional capacity building and development of an oil agenda to better serve the people of Guyana, this has to change as matter of priority and with a sense of urgency.
Sandra Weiss /DW/February 25, 2020