COUNTRIES across the emerging oil region of the Southern Caribbean are grappling with a delicate balancing act: meeting the world’s energy needs and growing their economies, all while preparing for a future of lower emissions.

International organisations agree that the earth needs to cut carbon dioxide emissions from oil, gas and coal in order to reduce the risks of climate change. Although the transition away from fossil fuels is proceeding rapidly in some sectors, the global economy is still expected to require growing amounts of certain fossil fuels over the coming decades, particularly tough-to-replace ones like crude oil and natural gas.

Trinidad’s Minister of Energy and Energy Industries, Stuart Young, put it eloquently last week to the Society of Petroleum Engineers Trinidad and Tobago 2021 Virtual Energy Resources Conference and Exhibition. “Even as we head towards a green economy, it is my belief and the mandate that we must focus on and prioritise monetisation of our hydrocarbon resource,” Young told participants.

With looming uncertainty about what demand for oil and gas may look like by 2050, there is tremendous pressure on new producers to make the most of their resources while they still can by fast-tracking development now.
Investors are still interested in financing large scale oil and gas projects for the time being. But the type of projects winning investment continues to narrow, as legacy fossil fuel companies shift their profiles towards the lowest cost, lowest carbon sources of oil and invest more in alternate sources.

Countries like Guyana, Brazil, Suriname, and Trinidad are all facing a similar dilemma. While all these countries have made it clear that they want to play a role in global efforts to reduce emissions, all expect to continue producing hydrocarbons in the near term while they can. The competition is also rising across the wider Latin American Region, especially as legacy producers like Mexico and Venezuela struggle to maintain production and compete against newer producers.

In cases like Guyana, the revenues from these projects are vitally needed for sustainable development. With sea levels rising and coastal communities suffering from decay in flood-control systems, the need for infrastructure investment in Guyana is only growing. Protecting fragile coastal ecosystems like mangroves that provide key natural defences will require even more effort. Without the billions of US dollars in oil revenues expected over the next decade, much of that spending would be nearly impossible to finance.

Guyana has long faced unique challenges as a country that is substantially less developed economically than many of its Caribbean neighbours like Trinidad. Newfound oil in the Stabroek Block could go a long way towards enhancing social development such as the health care and education systems.
The challenge for Guyana will be to balance oil development, meeting development needs and pursuing its environmental goals.

In some areas like electricity generation, fossil fuel development can become a positive for Guyana’s environmental impacts. Guyana Power & Light (GPL) currently relies on heavily polluting and expensive heavy fuel oil for generating electricity. With the developments offshore, Guyana will be able to transition to a natural gas system over the next few years, cutting carbon dioxide emissions significantly.

This situation is one key reason the International Energy Agency has made it clear that every country’s situation is different, even if it does not widely recommend more oil development. Vice President Dr. Bharrat Jagdeo said as much in recent remarks, when he noted that recommendations from the IEA are aspirational rather than prescriptive. He also expanded on plans for a vast expansion of renewable energy use in Guyana, particularly solar and hydropower.

With the current government’s push towards increased renewable energy, strict limits on emissions and flaring and the considerable carbon sequestration potential already in the Amazon, Guyana can still play a leading role in keeping carbon emissions low. If it’s able to balance that with the extraordinary development promised by oil revenues, this country will be an even more remarkable success story.