GUYANESE have heard many times that oil revenues will transform the country over the coming decades. Already, Guyana is set to make hundreds of millions of US dollars annually over the next few years. Analysts predict that by the latter half of the decade the annual profits will reach billions of US dollars.
That staggering figure is hard to even conceptualize at the moment and is many times more than the government’s current annual budget. The question that is on the mind of many Guyanese is: what will our government do with those funds? Amidst the start of election campaigns, plans are already emerging to leverage that once-in-a-lifetime influx of cash into strategic development projects benefitting the entire country.
Last week, the Granger Administration released its four-part “transformative process” for the next 10 years. The plan is to invest oil revenues in projects that will make Guyana a greener, more digitally connected and better educated country. Guyana’s new status as a “petroleum nation” will result in faster economic growth, increased employment and larger fiscal revenues, according to the plan.
Of course, the Government’s plan is not the only one being put forward. The PPP’s own plan similarly calls for investing some oil revenues in Guyana’s present needs like education, infrastructure and healthcare to help alleviate poverty and support job creation.
International organisations generally encourage countries to make these kinds of investments, especially in developing countries. That’s because developing markets have a dire need for better infrastructure and “human capital” to help unlock growth. On the other hand, more industrialised countries with extensive resources like Norway or Canada tend to get the best value from their resource wealth by saving most or all for the long term.
Plans and ideas to develop a better educated and healthier workforce are “force multipliers”—returning many times the initial investment in the form of a stronger, more diversified economy that creates a foundation upon which businesses and innovation can grow.
In addition, economic diversification and investment in non-oil sectors of the economy is a key part of avoiding “Dutch Disease” by preventing an unhealthy dependence on oil revenues. Once again, education and infrastructure investments can be particularly effective since they help companies and workers across all sectors of the economy compete better in the global market.
Despite the wide variations in how to achieve these goals, nearly all parties agree that it is important to continue developing wealth management tools like the sovereign wealth fund. This is because oil money investments must be made transparently and prudently. Projects should be evaluated and executed only if they benefit as many Guyanese as possible and be built with long term gains in mind. Some of the projects already proposed have been better road and communications systems to link the interior with Berbice and the coast, and improved seawalls and flood protection infrastructure.
Regardless of the specific projects Guyana invests in, all of these plans hinge on one thing: continued development and revenues from the oil sector.
The two projects that are already approved and underway—Liza Phase 1 and Phase 2—are just a small part of Guyana’s full potential. Combined, they will produce up to an incredible around 340,000 barrels per day. But that’s less than half of the total amount Exxon expects to produce in the Stabroek by 2025. It will take many projects and many wells in the Stabroek and elsewhere to reach the extraordinary levels of revenue that analysts predict are possible. The next step will be to grant approval for the third phase of development, known as Payara.
Luckily, continued exploration success signals that the resources are there to back up the lofty production goals. Recent finds in the Orinduik and across the maritime border in Suriname only confirm that there is enormous untapped potential out there—a potential that was totally unknown just a few short years ago.
With a proactive and thoughtful approach to encouraging development and careful investment policies, Guyana can ensure that oil benefits each and every Guyanese.