Groundwork for Guyana’s new industry

Guyana

Mark Bynoe, director of Guyana’s Department of Energy, talks to TOGY about the department’s priorities, the regulatory and legislative areas that must be strengthened ahead of the country’s oil and gas development and how hydrocarbons resources are expected to contribute to the growth of other sectors. The Department of Energy was established within the Ministry of the Presidency on August 1, 2018.

This interview is featured The Energy Year Guyana 2019

• On objectives: “Immediately, our aim is to ensure that we have very strong contract management coming out of the department, very good legislation and policies to guide what the department does, and that we are also well equipped with the necessary human capacity to carry out those functions. Last but not least, we aim to ensure we have very strong partnerships, since it is not the expectation that all of these tasks will be carried out by the department exclusively.”

• On hydrocarbons’ role: “We need to speak with the technical institutions to let them understand that as they prepare for the energy boom, the focus has to be beyond oil and gas. We have to be building resources not just for oil and gas. The oil and gas industry should be a catalyst to take the country forward. It is not going to be the be-all and end-all.”

What are the main objectives of Guyana’s newly established Department of Energy?
As President David Granger has indicated, the main focus is for us to move towards a more sustainable energy pathway with regards to the country’s development trajectory. That said, immediate objectives would be for us to regulate and manage the oil and gas sector, but the department’s objectives going forward are much broader than oil and gas. The president hopes that with time, the Department of Energy will morph into a ministry.
Immediately, our aim is to ensure that we have very strong contract management coming out of the department, very good legislation and policies to guide what the department does, and that we are also well equipped with the necessary human capacity to carry out those functions. Last but not least, we aim to ensure we have very strong partnerships, since it is not the expectation that all of these tasks will be carried out by the department exclusively.

What regulations are you looking to put in place, and how will you ensure they are enforced?
A lot of the regulations we put in place will be to, inter alia, manage the sector, inclusive of the production-sharing agreement. For example, any company wishing to explore in Guyana would have to have an environmental permit and an exploratory licence.
The entities to issue these permits already exist. We have the EPA [Environmental Protection Agency] and the Petroleum Unit within the GGMC [Guyana Geology and Mines Commission]. We are seeking to elaborate the Petroleum Commission Bill, out of which is likely to come the Petroleum Commission. The expectation at this point in time is that that commission will become the regulatory arm in terms of, inter alia, ExxonMobil adhering to the stipulations within the PSA. However, contract management will not be left only to the Petroleum Unit.
We also have the issue of regulating local content. We are developing a local content policy, with regulations likely to follow thereafter. In the interim, the idea is for us to hire technical experts, first of all, to assist the country in preparing the requisite legislation and regulations that will be taken to the Guyanese public before going to the National Assembly.
Additionally, it will be important to further have international and, maybe regional expertise, that can assist us in ensuring licensees are adhering to the spirit and letter of the PSAs, with this time being used as a grandfathering/mentoring period, as we seek to build our own capacities. I am not saying there is no capacity, but it is extremely limited.

What is the department’s vision for Guyana’s energy matrix?
The department’s focus going forward is beyond oil and gas. We all know hydrocarbons are an exhaustible resource, and Guyana has a wealth of renewable resources including hydroelectric, solar and some thermal, as well as wind potential. The idea is to use the resources from oil and gas to help us along our development trajectory, whereby we would move into those renewable energy mixes.
We have to ensure that the baseload is maintained and there is as little fluctuation as possible. Our energy cannot come from only one source, even though hydro is very stable. Government policy has been moving towards mini-hydro plants rather than big hydroelectric plants that tend to have large carbon footprints.

Do you have a specific plan for diversifying the energy mix?
It is going to be a transitional period. If you go back to Guyana’s submission to the United Nations Framework Convention on Climate Change, it would have elucidated within its own plan the objectives by 2025, in terms of its nationally determined contribution to reducing its carbon footprint.
Using natural gas, even though it is not renewable, is much cleaner that petrol. We recognise that gas will be used as a transition fuel. The idea also is to ringfence the gas component, so it is not linked into the general grid system. We are expecting to say we have some footprint, but we will isolate it to a specific location rather than nationwide.
We are moving on a mini-hydro plant in the Mabaruma, Barica and Lethem regions, and we are going to be putting up three solar plants. There is a discussion to move solar facilities into the intermediate savannas. Minister of Public Infrastructure David Patterson has also discussed the Hope site for a smaller 20-MW wind farm.
A number of initiatives were in place before the Department of Energy came into being. We are collaborating to ensure there is consistency and cohesion in terms of how we move forward.

Will the Department of Energy collaborate with Guyana Power and Light to bring down the price of electricity and update infrastructure?
The gas-fired power plant was likely to supply almost 70% of our current energy demand. It could be a bit higher or lower.
Under the LCDS [Low-Carbon Development Strategy], the Kingdom of Norway is providing another USD 80 million to Guyana to move towards renewable energy. The idea there is for us not to focus just on what the current situation, but also to project where we want to be in 10 or 20 years.
The cost of energy in the Caribbean is pretty high, with the exception of Trinidad and Suriname. Almost anywhere else is paying more than USD 0.20 per kWh. That is not unique to Guyana. We recognise that can have an impact on industrial development, which is why the government’s view is that it is not just about energy security, but also about energy pricing.

What will the Department of Energy mainly be concentrating on in the short-to-medium terms?
We see that the immediate needs are getting clear lines of authority in terms of who will do what. We are working through that right now. The department is not a ministry, even though the president has expressed a desire for us to morph into one. We have to look at how we bring the bits and pieces together in terms of the Petroleum Directorate within the Ministry of Natural Resources and the Petroleum Unit that is within the GGMC.
To complement that, we also have to work on the legislative environment and making sure that is in place. You cannot create a creature without the necessary legislative backing. I am speaking specifically about the regulatory body, which is dependent on what happens with the Petroleum Commission Bill.
Outside of that, we also need to start getting bodies in place, which is why you may have seen us advertising for some administrative staff. We are also working on getting technical people in place. We are having to work on dual tracks to satisfy immediate needs.
There are two pressing issues we must confront. One is contract management. We have to ensure that the PSA is being managed and adhered to, and at the same time, we have the auditing and recoverable cost issue. We have to start that process also. It is imperative we get the technical expertise in to help guide us towards other things we should be looking at.
In the short term, it is up to us to complete the work started by Minister of Natural Resources Raphael Trotman, his ministry and others on local content and the work being done by Minister of Finance Winston Jordan and his ministry with regards to the natural resource fund, which was previously known as the sovereign wealth fund. We need to get a model contract or PSA in place so we can ensure there is consistency, better ringfencing and greater benefits that will redound to the people of Guyana.
We also need to complete the revision of the Petroleum Act. Our fiscal Act will also need to be looked at and possibly tweaked. A lot of that will not just be with the Department of Energy, but also with other ministries and departments.
Moving towards the medium, we need to have good and strong partnerships. We cannot do all of this alone. The kinds of relationships we would need are those with, inter alia, the EPA, Ministry of Finance and Ministry of Public Infrastructure.
We also need to create a space to engage with our donor partners. Donor co-ordination will be extremely important to us. There are a number of entities that wish to assist the department, but we have to make sure there is a proper master plan in terms of where we want to go and who we will partner with in which areas moving forward.
In the medium term, I look forward to having a ministry rather than a department, which will evolve into a full-fledged concentration on energy. The immediacy would be in oil and gas, but that would morph into energy more broadly, inclusive of both renewable and non-renewable energy, building up the necessary frameworks within Guyana to help us be able to do good economic modeling, reservoir and production profiles, strong negotiating, good contract management and so forth.

What should the focus be in the long term?
In the long term, as well as speaking with entities such as the University of Guyana, we need to speak with the technical institutions to let them understand that as they prepare for the energy boom, the focus has to be beyond oil and gas. We have to be building resources not just for oil and gas. The oil and gas industry should be a catalyst to take the country forward. It is not going to be the be-all and end-all.
The range of skills we are looking for will come from the indirect benefits of oil and gas. The government will now have major infrastructural expansion programmes and will require civil and mechanical engineers, construction engineers, plumbers, electricians, etc.
Also in the long term, I am hopeful that we can have sound policies, systems and regulations in place that will ringfence whatever we do, irrespective of political administration. The benefits from this sector will benefit all Guyanese, taking us to greater social, economic and physical development.

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