(MENAFN - Caribbean News Global) By Dr Terrence R. Blackman
In a recent news report , CGX Energy Inc. announced that the drilling of the Kawa-1 well, the first well at the Corentyne Block offshore Guyana, is set to commence before August 15. This undertaking is reported to cost close to USD 85 million. The Corentyne Block is 200 km offshore Georgetown, and these operations will take place at water depths of 355 meters (1,174 ft).
The expected total drill depth of the Kawa-1 well is 6,575 meters (21,700 ft). For perspective, the Kaieteur Falls is a massive waterfall that is roughly four times higher than Niagara Falls in Canada and twice as high as Victoria Falls in Southern Africa.
The Kaieteur Falls is considered the largest single drop waterfall in the world—”single drop” means that the water does flow over multiple tiers as it falls; in other words, there’s one massive drop from the top waterfall to the bottom. The Kaieteur Falls is 741 feet tall. Guyana’s Oil and Gas explorations take place at depths of 30 Kaieteur Falls beneath the sea. Given this reality, it is instructive to note that ExxonMobil, operator of the Stabroek, Canje, and Kaieteur blocks, is the only company thus far that has commenced production offshore Guyana. ExxonMobil has made twenty discoveries since May 2015 and began production in December 2019 at the Liza project.
This, welcome news, once again highlighted the key theme, Guyana's Oil and Gas opportunity is a high-risk, high-capital, and technologically-intensive endeavour, that emerged at the recently concluded Queen’s College of Guyana Alumni Association, NY Chapter(QCAANY) symposium on Navigating the Opportunities and Imperatives in Guyana’s Oil and Gas Economic .
QCAANY is the New York Chapter of the Queens College of Guyana alumni association. It is a registered non-profit corporation that has been incorporated for 30 years. It furthers the academic, and extracurricular interests of Queen’s College, Guyana by way of scholarships to high-performing students and scholarships to financially challenged students. In addition, the group has conducted programs such as summer math camps and student conferences aimed at better preparing Queen’s College students for the world after graduation.
The symposium is a part of QCAANY’s effort to foster constructive civic engagement on matters of public interest throughout the Guyanese diaspora. It aimed to educate the Guyanese diaspora on the workings of the emerging Oil and Gas industry and to outline opportunities for private investment, workforce development and training, local content imperatives, and diaspora engagement.
The first panel focused on the opportunities emerging in the Oil and Gas sector. The panelists were Dr Dennis Pieters and Fareed Amin, and the moderator was Aftab Karimullah. The second panel focused on the imperatives, consisted of Edwin Callender and Abbigale Loncke. Rosalind McClymont moderated the discussion.
In Part I of my Report from the Symposium I discussed the contributions of Dennis Pieters, an international reservoir engineering consultant, professor, and author who currently serves as a director of Mid-Atlantic Oil and Gas Inc., in Georgetown, Guyana.
In Part II of my report from the Symposium, we reflect on the presentation by Edwin M. Callender, attorney & energy consultant of the Callender Law Firm in Houston, Texas. He presented on the efficient and sustainable exploitation of Guyana’s Oil & Gas resources for the maximum benefit of the Guyanese People.
Attorney Callender is a graduate of the Thurgood Marshall School of Law, Texas Southern University, and holds graduate degrees in chemical engineering, business administration, and finance from the University of Houston. He is an alumnus of Bishop’s High School, Guyana and the principal consultant at EMC Energy Consulting LLC, international energy economics, research, management, and process operations consulting firm. He is a member of the Association of International Petroleum Negotiators (AIPN) and serves on the board of directors of the Houston Lawyers Association.
Callender began by reviewing the fundamentals of the Oil and Gas value chain for the audience. The value chain starts with opportunities associated with discovering oil fields and ends with provisioning of products to end consumers, i.e., opportunities related to the different stages of the Oil and Gas production process: exploration, production, storage and shipping, refining, and marketing. Attorney Callender argued that the essential role of the Guyanese socio-economic and political leadership was to create an environment conducive to the optimal exploitation of Guyana’s Oil & Gas resources for the maximum benefit of the Guyanese People. In short, Callender observed, the challenge for Guyana’s political leadership is to identify, define, locate, and facilitate opportunities for all Guyanese arising from oil & gas development.
To achieve this aim, he directs us to look specifically at the steps in the value chain and target our efforts at creating opportunities for Guyanese in each sphere of the endeavour. For example, he asks us to consider, say oil field services, and observe the numerous jobs in oilfield services ranging from Field Service and Maintenance Technicians. Guyana’s goal, he argues, is to develop targeted strategies and infrastructure for engaging Guyanese in the various oil field services jobs. The key for Callender is the crafting of concrete pathways to specific employment opportunities in these sectors for Guyanese while building skills that are viable beyond the Oil and Gas sector.
A second application of the Callender doctrine: As the plans emerge for the Wales Gas to Shore project , Attorney Callender would argue that Guyana develops a specific focus on jobs and educational training for Guyanese in oil and gas storage and transportation . Specifically, training in Urban Gas Transportation and Distribution, Design and Management of Oil Transportation Pipelines, Oil and Gas Storage and Handling Systems, Oil and Gas Gathering and Transferring, and the Design and Operation of Gas Pipelines as a means to engaging Guyanese in a meaningful and impactful manner in this area of endeavour.
Attorney Callender also addressed the issue of Local Content. He asserted that an effective Local Content Strategy(LCS) was critical to Guyana’s opportunity in Oil & Gas being a transformative one for Guyana and Guyanese. He posited that Guyana’s LCS ought to be crafted, implemented, and managed as an integral component of the nation’s development strategy. He argued, like Dr Pieters, that the LCS should focus on the employment of locals and on building local capacity and skills development through education and training.
Callender also spoke to the crucial importance of developing Guyanese industrial competence and capability. In this vein, he argued for a government-driven policy to catalyze Guyanese industrial participation in the Oil and Gas economy. Attorney Callender noted in this regard the need for a national policy for Small and Mid-size Business Enterprises (SMBEs), i.e., businesses with revenues, assets, and number of employees below certain thresholds. Alluding to SMBEs important role in the economy, employing vast numbers of people and helping to shape innovation, Callender pointed to the need for Guyana to clearly define what constitutes a small and medium-sized enterprise and to develop enabling incentive infrastructure, including favourable tax treatment and access to loans as appropriate, to stabilize and amplify this sector of the Guyanese business community.
I add here, a personal reflection that there is an opportunity for such a policy to diversify the economic landscape of Guyana and I note there are serious concerns that the government's local content policy favours larger established businesses by requiring adherence to strict near term targets and government certification.
Attorney Callender also spoke of the need to update and make our environmental, health, and safety protection laws and regulations more robust. He noted that engagement and utilization of the diaspora could affect the repatriation of skills, capacity, and resources and he also noted the vital importance of protecting and preserving the health and safety of Guyanese and residents of the Caribbean region by ensuring a regulatory regime that enables practices that protect the environment, land, water, air, plants, and animals from degradation, destruction, waste, and contamination
A high point of the presentation and one which elicited great interest among the audience, many of whom were naturalized citizens, was attorney Callender’s discussion on the laws governing US citizens investing or operating companies in Guyana, specifically, the Foreign Corrupt Practices Act (FCPA).
The FPCA, he noted for the audience, had two salient provisions: (i) an anti-bribery provision and (ii) an accounting provision. These components, he explained, are jointly enforced by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).
The anti-bribery law prohibits the offering to pay, paying, promising to pay, or authorizing the payment of money or anything of value to a foreign official to influence any act or decision of the foreign official in their official capacity or to secure any other improper advantage to obtain or retain business.
Critical to this provision, he notes, was that there is no requirement of materiality. Thus, it is sufficient to establish the intent of the bribery rather than the amount to run afoul of this law. He further shared that broadly construed, under the “alternative jurisdiction” provision of the FCPA there is no requirement for the use of interstate commerce (e.g., texts, email, telephone call, wire) for acts in furtherance of a corrupt payment to a foreign official by US companies and persons occurring wholly outside of the United States. He strongly cautioned the audience to be mindful of the FCPA when engaging in business activity in Guyana. He noted that civil and criminal penalties for the violation of the FCPA could include hefty fines, disgorgement of profits, and imprisonment.
The accounting provision applies to public companies, and it requires adherence to the industry standards for the maintenance of (i) books and records and (ii) internal controls.
Attorney Callender closed his presentation by drawing the audience’s attention to Guyana's membership in the Extractive Industries Transparency Initiative (GYEITI). Member countries commit to disclose information along the extractive industry value chain, specifically, how extraction rights are awarded, how revenues make their way through the government and how they benefit the public. Through participation in the EITI, 55 countries have agreed to a common set of rules governing what has to be disclosed and when. Guyana published, in April 2021, its second EITI Report , covering the fiscal year 2018.
The report includes data on extractive activities such as mining, oil and gas, fisheries, and forestry. In 2018, according to the Bureau of Statistics, all extractive activities combined represented 17.7 percent of annual GDP, 74.2 percent of Guyana’s total exports, and 11.3 percent of government revenues. It will be very interesting to see how this distribution evolves over the next five to ten years as estimates for future annual revenues approach tens of billions of US dollars, several times the entire current GDP. GYEITI is expected to review the legislation that will determine the legal and institutional framework for public disclosure of information on the extractive industries. Attorney Callender urged civic-minded members of the audience to maintain constant vigilance on the workings of GYEITI.
We close by noting that during the Q & A session which followed the presentations, enquiries surfaced around Guyana’s Sovereign Wealth Fund and avoiding the resource curse. We will explore these two topics in our two upcoming essays.
QCAANY Guyana Oil and Gas symposium report: Part II | MENAFN.COM