· 10 min read
Guyana is on the verge of a transformative shift as it emerges as a major player in the global oil market. Guyana is set to become the world's fourth-largest offshore oil producer, ranking alongside leading oil-producing nations such as Qatar, the United States, Mexico, and Norway.
In a recent BBC Hard Talk interview, the clash between BBC journalist Stephen Sackur and Guyana’s President, Dr Irfaan Ali, epitomized the heart of the debate between the Global North and South regarding climate change and environmental protection.
For those who still consider Just Transition principles as theoretical, here's a concrete example highlighting the urgent need for more practical application. This bilateral discussion on oil phase-out should serve as a perfect example of what the Global North should not be doing.
Not all oil developments are equal
President Irfaan Ali: “To understand this growth and what it means for our country, you need to have an appreciation of where we came from and the type of difficulties we have overcome as a country to be where we are today.”
An ExxonMobil-led consortium has discovered over 11 billion barrels of oil equivalent resources, offering economic promises for Guyana, a nation previously plagued by economic and political challenges. Emerging from a 28-year period of dictatorship, Guyana was ranked among the poorest countries in the Western Hemisphere, with nearly 43% of its population living below the poverty line.
At the very beginning of the interview, the President emphasizes the urgent need for Guyana to advance its infrastructure and social development. Key priorities include establishing a world-class healthcare and education system to reverse decades of underinvestment. The President also highlights the importance of reconnecting with the significant diaspora that migrated during the dictatorship era to harness their skills and resources for national development.
For countries like Guyana, oil extraction represents a pathway to a brighter future, contrasting with the experiences of developed nations like the United States, Canada, the United Arab Emirates, and the United Kingdom, where economic and human development is not reliant on oil revenues anymore.
The looming threat of the resource curse for Guyana
The causes and consequences of the Resource Curse are well-documented through post-mortem examples. However, in the case of Guyana, it's alarming to see these risks are looming large, underscoring the urgent need for cautious measures to avert potential pitfalls.
External and internal conflicts
BBC Journalist: “Your enormous new wealth has stirred resentment in your neighbor Venezuela.”
Satellite images reveal an escalated military buildup by Venezuela near its border with Guyana, reigniting a century-and-a-half-long dispute over the Essequibo region, claimed by both nations.
Despite a recent agreement in December between President Maduro and Guyanese President Irfaan Ali to avoid the use of force, Venezuela's military deployment represents a departure from this accord, heightening tensions and risking further escalation.
This development coincided with Exxon Mobil's announcement of continued oil exploration in the offshore area contested by Venezuela.
BBC Journalist: “There is a clear ethnic element to the politics of Guyana”
Guyana is a nation characterized by a vibrant mosaic of diverse cultures, religions, and ethnicities. Approximately 40% of its population identifies as Indian or Indo-Guyanese, while 29% identifies as African or Afro-Guyanese.
Despite this cultural diversity, the country faces significant challenges in forging national unity and harmony. Deep-seated ethnic and socioeconomic divisions persist, particularly in the distribution of wealth, and the discovery of substantial oil resources poses additional complexities.
There is also the Indigenous Amerindian population, comprising 10.5% of Guyana's demographics, which often receives insufficient recognition, especially regarding their ancestral lands in the sacred Essequibo region.
President Irfaan Ali rightfully reminds the journalist: “Ethnic division of this country was instigated by external forces; This is part of your legacy.”
Spoliation of the Global South's Wealth by Western oil & gas companies
In 2016, Exxon aggressively pursued a new deal seeking to retain the favorable financial terms it had secured in 1999. The New production-sharing contract deprives Guyana of a significant part of the revenue and environmental insurance in case of accidents (such as leaks)
BBC Journalist: “Why did Guyana give Exxon such an extraordinary, sweet deal ?”
A Global Witness report highlights an imbalance in profit sharing under the Production Sharing Agreement (PSA), with the government receiving only 52% of profits. According to the report, applying a 10% royalty and a standard corporate income tax (CIT) of 25%, which are common international practices, would have resulted in a government takeover of 69%. This adjustment could have potentially earned Guyana an additional $55 billion.
Exxon employed aggressive negotiating tactics during the deal-making process: allegedly corrupting Guyana’s Natural Resources Minister, Raphael Trotman, pressuring inexperienced Guyanese officials during negotiations in Texas in early April 2016, presenting a new draft license with a ten-week deadline and threatening to halt oil field development, jeopardizing Guyana’s emerging oil sector and the crucial revenue it promised, unless the deal was swiftly concluded.
BBC Journalist: “The Guyana Court decided that your own Environmental agency and Exxon had failed to provide the necessary guarantees that any oil spill would be paid for by Exxon.”
Cases of the oil and gas industry pressuring developing countries to accept skewed contracts are a well-documented and Guyana is now trapped in a Catch-22 scenario. The country faces the dilemma of either accepting a disadvantageous deal with Exxon to secure some funding for development or risking breaking the contract, which could send a negative signal to foreign investors.
President Irfaan Ali: “We have said publicly that this was a bad deal – skewed towards Exxon, but we cannot move from a bad deal from a situation where you unilaterally change a contract.”
Countries like Nigeria and Papua New Guinea have recently called for oil companies to renegotiate the terms of their licenses, highlighting a broader global issue of unequal agreements in resource-rich regions. But chances of success are very low.
It's ironic to note that Guyana has also experienced the resource curse despite its significant reserves of gold, diamonds, and bauxite.
Risk of authoritarianism
BBC Journalist: “There are fears from the opposition that the money you have access to is entrenching your Political Supremacy and will create a one-party state.”
A USAID report acknowledges Guyana's political instability and raises concerns about its readiness to manage newfound wealth effectively and equitably distribute the resulting financial benefits.
The existence of a major single-point revenue source, such as oil projects, often enables elites to control funds outside standard budget processes, leading to reduced transparency. Examples from Afghanistan, Sierra Leone, and Tunisia support this assertion.
Global North’s Hypocrisy Climate Change
This is the heart of the debate and marks a pivotal moment in the discussion, capturing millions of views on social media. The journalist highlighted that two giga tons of CO2 would be released from Guyana's seabed into the atmosphere, to which the President responded: “I’m going to lecture you on climate change.”
Sweep in front of your own door
BBC Journalist: “Greenpeace said that to avoid the worst impact of climate change, we need to keep the majority of the world's remaining fossil fuels in the ground.”
Since the first licenses were issued for oil and gas extraction from the North Sea in 1964, approximately 42 billion barrels of oil have been produced, with an estimated additional 24 billion barrels in untapped reserves. Despite this, the UK Government continues to support the North Sea oil and gas industry, as evidenced by the announcement in July 2023 by the Prime Minister to grant hundreds of new exploration licenses to access these untapped reserves.
Notably, the Global North has historically been the primary contributor to climate change. For instance, the United States alone accounted for roughly 17% of global warming from 1850 to 2021, whereas India contributed 5% and the Least Developed countries contributed 6% during the same period. Despite this historical responsibility, countries like the US, UK, Canada, Australia, and Norway are still planning significant oil and gas extraction expansions. According to research by Oil Change International, these nations collectively account for 51% of the planned oil and gas expansion by 2050.
A Just Transition would entail a fair redistribution of remaining oil production prior to achieving Net Zero emissions, particularly benefiting countries that have not significantly contributed to global warming and are in urgent need of economic development.
The failure of a BBC news representative to contextualize Guyana's oil extraction within this broader perspective highlights a clear oversight and underscores that international equity remains inadequately prioritized in the global north.
No money for climate change adaptation in the Global South
President Irfaan Ali: “Greenpeace, and you can say that, but we need to get resources to develop. Who just said we are 6 feet below sea level. Who is going to pay for the infrastructure? Where is the money for adaptation in the developing world ?”
At COP15 in 2009, developed countries pledged to mobilize $100 billion annually by 2020 for climate finance. In 2021, the OECD reported that developed nations provided $89.6 billion to developing countries, and at COP28, the OECD suggested that the $100 billion target may have been reached, although this claim lacks verifiable data and appears to downplay the two-year delay.
These figures have been disputed by NGOs, with Oxfam's 'Climate Finance Shadow Report 2023' revealing that the actual climate finance value was likely no more than $24.5 billion due to overestimations and loans reported at face value. Providing funds as loans instead of grants risks worsening debt burdens, especially for heavily indebted countries facing rising interest rates. Additionally, only 33% of reported public climate finance was allocated to adaptation, while 59% was earmarked for mitigation efforts.
A special Loss and Damage fund for adaptation in least-developed countries was announced at COP28. Although this is an encouraging step, the first financial pledges were considered inadequate given the estimated annual losses and damages ranging from $100-580 billion. President Irfaan's scepticism is justified, as the delayed establishment of these funds and limited contributions from wealthy nations highlight a significant funding shortfall.
Notably, the UK's £60 million ($75 million) pledge was criticized as neither new nor additional, having been repurposed from an existing and recently reduced climate finance commitment.
This should have prompted greater caution from the BBC journalist when discussing Guyana's vulnerability to climate change consequences.
Unpaid nature services paradox
President Irfaan Ali : “Do you know that Guyana has had forever a forest that is the size of England and Scotland combined? A forest that we have kept alive, that you enjoy, that the world enjoys, that you don’t pay us for.”
The Essequibo region is situated within the unique geographical area known as the Guiana Shield. Serving as the source of two atmospheric rivers that distribute moisture across South America, this region plays a pivotal role in stabilizing weather patterns and preserving forests in the Amazon Basin and beyond. Scientists often refer to the Guiana Shield as a 'hotspot' or a 'thermostat' due to its forests' ability to regulate temperatures across the Amazon basin while capturing millions of tons of carbon.
The President highlights a significant paradox here: countries that engage in deforestation are often financially rewarded for protecting their forests, whereas nations that prioritize environmental conservation without financial motivations do not receive comparable compensation.
LEAVIT’s conclusion
This exchange epitomizes the critical challenge that international climate action must address.
The complexity of climate change and broader environmental protection stems from the tension between global commons (such as greenhouse gases in the atmosphere, forests, oceans, and biodiversity) and territorial borders that claim jurisdiction over natural resources. Resolving this challenge requires a profound sense of equity among countries, considering historical contributions and the imperative for economic and human development.
This discussion revives the spirit of initiatives like the Yasuni ITT Initiative, where President Correa of Ecuador called on the global north to provide financial compensation in exchange for not drilling oil in the Ecuadorian forest, recognizing that its natural benefits belong to everyone. Asking developing countries to phase out oil without addressing their social and economic aspirations is not only ineffective but also perpetuates a new form of neo-colonialism.
It is disappointing that the Western NGOs quoted in the interview were not cited to advocate for an international Just Transition.
To make oil phase-out advocacy strategies relevant, they must acknowledge the potential benefits of oil and gas extraction for the Least Developed Countries and identify alternative pathways to achieve economic progress.
I don’t understand why this subject is not in every NGO’s agenda.
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