GUYANA has already generated more than 500 million U.S. dollars from oil development to fund public works, infrastructural development, and social programmes. But, while revenues will always be the biggest impact of development, Guyana’s growing oil-and-gas sector has the ability to create new opportunities for the country in entirely different sectors. And it is important to understand just how vastly the energy sector could positively impact the rest of the economy, not only in job creation, but also in the development and growth of spin-off sectors.
As the workforce advances and becomes more specialised through training programmes and work experience, the economy also becomes more complex, providing more opportunities for diversification. And Guyana is already taking action to ensure that it has a secure future once oil and gas are gone. The gas-to-power project, for example, will open up a number of new opportunities that will allow the country to expand and diversify its economy.
A gas-to-power plant will provide Guyanese with better, more affordable, and more reliable electricity that reduces emissions, compared to the heavy fuel oil that is used now. Cheaper electricity can lower barriers to entry for new businesses and make it possible for businesses to expand into energy-intensive sectors such as manufacturing and food processing, which often require cheap electricity to be profitable. Lower prices and more reliable power can also reduce costs for current industries such as sugar, and will help these industries become more efficient and profitable.
Expanding further into industries such as food processing and light manufacturing would also help Guyana to move up the value chain. This means converting domestic raw materials such as sugar into higher-value products that generate more profits and jobs.
The pipeline that will eventually supply the gas- to-power plant can also create new opportunities in spin-off sectors by supplying crucial raw materials. Natural gas is the most important feedstock to produce many chemicals and fertilisers. Trinidad and Tobago provides just one example of a country that was able to successfully diversify its economy by expanding from oil and gas into the chemicals sector.
Fertilisers may be a particularly smart route for Guyana, considering its agricultural heritage and strong local demand. Natural gas, like the associated gas that the government plans to pipe onshore from the Stabroek Block, is a key ingredient in the production of most commonly used fertilisers. While Guyana’s market is likely too small to support an oil refinery, converting natural gas into products such as butane and propane for domestic consumption is also a viable option that could be done at the right scale. This would also help further reduce Guyana’s reliance on imports for key supplies such as cooking gas.
These industries can also create opportunities for new businesses to open and for Guyana to develop capacity to provide some services and businesses that are currently outsourced to international companies. By diversifying the economy, Guyana is also safeguarding itself for when oil and gas runs out.
Other historic producers that have done this, such as the United Arab Emirates (UAE) and Scotland, were able to ensure a stable and financially safe future for themselves. The UAE used oil revenues to build an extensive chemicals and financial industry and become a hub for trade, while Scotland is now using its extensive experience in offshore oil production and service to become a hub for offshore wind production and manufacturing.
This is the kind of mindset Guyana needs to have going forward. Oil will bring 10s or even hundreds of billions of U.S. dollars, but it will not last forever. That makes the question of how Guyana can use that wealth to diversify into other sectors all the more important.