Leveraging Guyana s Emerging Petroleum Sector for Sustainable and Inclusive Growth Patrice de Vivies, World Bank Group Georgetown, September 25, 2017
World Bank Group Organizational Structure Technical Advisory Services Technical Advisory Services 2
Examples of WBG current support in other emerging oil/gas producers Ghana Oil and Gas Capacity Building Project, with support for: Sector Governance Resource Management Petroleum Data Management Oil Revenue Management Environmental Management Vocational Support, and Support to the Kwame Nkrumah University of Science and Technology (KNUST) Senegal Supporting Gas Project Negotiations and Enhancing Institutional Capacities, with support for: Support for hydrocarbon project negotiations Enhancement of the strategic and policy framework Institutional diagnostic and capacity building Stakeholders engagement campaign Mozambique Mining and Gas Technical Assistance Project, with support for: Transaction advisory services for gas and related infrastructure Legal and regulatory framework for Hydrocarbons Capacity Building support for the Ministry of Natural Resources and for the National Institute of Petroleum and for the National Petroleum Company (ENH) Revenue generation and management Environmental and Social Management Framework for oil spill preparedness and response capacity Economic linkages of Mines and Gas Production General Inspectorate, Health and Safety and Regulatory Enforcement 3
Sustainable Development Action: WBG Global Initiative Zero Routine Flaring by 2030 The essence: Oil companies New oil fields: Make development plans with zero routine flaring Existing oil fields: Seek economically viable solutions to end routine flaring as soon as possible and no later than 2030 Governments New oil fields: Require development plans with zero routine flaring Existing oil fields: Make every effort to end legacy flaring as soon as possible and no later than 2030 Policies: Provide legal/regulatory/investment/operating environment conducive to upstream investments and the development of energy infrastructure and markets Development institutions Facilitate cooperation and implementation Consider the use of financial instruments and other measures 4
Sustainable Development Action: WBG Global Initiative Zero Routine Flaring by 2030 5
The Petroleum Value Chain A Governance Perspective In order to get the best deals that are best managed for sustainable development, it is essential to address all challenges the government will face in the development of its petroleum sector in a holistic way. Non-renewable Resources Award of contracts and licenses Regulation and monitoring of operations Collection of taxes and royalties Revenue manageme nt/ distribution Environmentally and socially sustainable projects Sustainable Development Governance and accountability, Political Economy Main Activities -Petroleum Policy -Legal, Regulatory and Fiscal Frameworks; -Contract Negotiation; EI Technical Advisory -Contract monitoring Capacity Building for Sector Ministries and Regulatory Agencies; Investment in Geological data & mapping; Improving NOCs Efficiency Improving Fiscal Policy and Tax Administration Public financial mgmt. Macro impact of EI, Preliminary Economic Assessment Financial Management (FM) PPPs aligning public / private sector investment Local Content / Economic linkages Integrated Spatial Planning / infrastructure/geochains 6
Transparency is not a Nice thing to Have Transparency is key for attracting investors and building trust among levels of government and range of stakeholders to minimize conflict Making information publicly available will help lead to more effective institutions and better use of resource wealth Transparency can help address a host of negative behaviors arising from challenges including corruption, conflict and poor development planning 7
Transparency matters along the entire value chain 8
Guyana: A World Class Exploration Potential The magnitude of Guyana s oil resources is still subject to further exploration The estimated recoverable resources in the Stabroek Block offshore are between 2.25 to 2.75 billion barrels of oil equivalent, i.e. gross value US$110-140 bn at current oil prices FID of Phase 1 of Liza (450 million barrels) was in mid-june 2017 (capacity 120,000 barrels per day (bpd)). Start-up expected in ½ half of 2020. Associated gas to be mostly reinjected. Phase 2 of Liza (+ Paraya) is expected to start producing in 2023 (450 million barrels, 120,000 bpd additional capacity). 30 Mscfd of associated gas will be produced. There are other prospects to be drilled in Stabroek and other offshore blocks Against this background, expectations surrounding local benefits are on the rise. Source: ExxonMobil, 2017 Government take will be limited in first years due to cost recovery/profit sharing. Communications with the general public is critical for maintaining legitimacy domestically and credibility internationally. 9
The Petroleum Sector Can Support Broad Based Economic Development The petroleum sector can provide substantial contribution to a country s economy. But policy intervention is often necessary to support broad based economic development particularly when oil/gas is offshore. Fiscal linkages Productive linkages Often very large compared to the rest of the economy. Some challenges: Inter-temporal resource allocation Macro-fiscal stability and sustainability Lack of absorption capacity Inadequate public investment capacity Poor public finance management systems Visible and widespread impact on employment, and economic densification and/or diversification. Some challenges: Capital and technology intensity Restrictive local business conditions Lack of relevant local skills Information asymmetry Lack of cooperation/coordination across investors Lack of integration with other economic policies 10
Leveraging the Petroleum Value Chain to Boost Economic Diversification Local content is understood to be the local resources a project uses or develops along its value chain. This may include employment of nationals, procurement of goods/services from companies resident in the host country, partnership with local entities, development of infrastructure, improvement of local skills and capacities of local businesses, and improvement of local technological capabilities. Skilled workforce Goods and services Supply chain Development, Shared Infrastructure, Clusters, Regional Development, Spatial Planning 11
Local Content Stakeholders and what is in it for them? Governments Economic resilience through diversification, reduce inequality, stable societies Petroleum Industry Long term profitability and social license to operate Citizens Tangible benefits from oil/gas extraction Donors Shared prosperity, and more efficient aid allocation Local Suppliers Access supply opportunities and improve competitiveness 12
Guyana s Local Content: Challenges & Opportunities Challenges: The petroleum sector is only expected to create a limited number of direct and indirect jobs The petroleum sector requires high standard/internationally competitive skills, technology, equipment, infrastructure and services most of which are currently not present in Guyana Some goods/services are only needed for short period of time and need a large number of clients to be sustained Small size of Guyana s economy and capital markets Opportunities: Backward linkages: Provision of goods and services (catering, hoteling, supply vessels/aircraft, onshore supply base, etc.) Forward linkages: o Gas-to-power. In Phase two of Liza 30 million cubic feet per day could be used to power a 200 megawatt power plant, reducing the country s dependence on more expensive heavy fuel oil. If additional gas discoveries are made, other industries could be developed Lateral linkages: Investment/capacity to benefit other sectors of the economy (agriculture, tourism, etc.) 13
Thank you Patrice de Vivies Sr. Adviser Tel.: +12024589052 pdevivies@worldbank.org
ANNEX - 1 Case Study 15
Enhancing Fabrication Capabilities - (EFCN INTSOK) Nigeria Overview Enhancement of local content in upstream oil and gas industry in Nigeria by improving ability of local engineering /fabrication firms to comply with international oil and gas sector requirements on quality management, health, safety, environment, welding standards. Main Activities Gap analysis and business diagnostics Training in management systems, project management, welding skills Mentoring for international ISO certifications and industry quality standards Creation of accredited fabrication training center Results Creation of Fabrication Training Centre Foundation a center of excellence for international certification in fabrication and allied fields 171 new jobs created 9 fabrication companies receiving training/mentoring 423 employees trained $46.9m total revenue increase from new contracts $10m equity financing facilitated for one fabrication company Participants at a Fabrication Yard in Norway 16
ANNEX - 2 Petroleum Value Chain 17
Petroleum Value Chain 18