Thursday, December 14, 2017

Norway refuses Guyana’s request for oil sector aid, pressures government for clean energy plan

In the wake of massive oil finds off the coast of Guyana, the government in Georgetown has asked the Norwegian Oil for Development (OfD) programme for assistance to manage its burgeoning petroleum sector. Norway has turned down the request, but Guyana is still hoping Norway will change its mind.

“We will continue to be expectant and in the meantime, we will continue our preparations,” Guyana’s Minister of Natural Resources Raphael Trotman says to Development Today.

In a letter from Trotman to the Norwegian government last August, the minister expressed his country’s interest in “adding another dimension” to the partnership with Norway. The minister noted that Guyana is “on the cusp of the development of a notable oil industry” and asked for support from the OfD programme to develop regulatory and policy frameworks for the petroleum sector.

The request from Guyana for help to build up its legal and bureaucratic infrastructure to manage oil and gas production comes at a time when the two countries’ cooperation in the field of climate and forest has been in a deadlock for several years. Through a USD 250 million aid agreement, Norway had planned to reward Guyana for protecting its forests, as a way of combating climate change, and payments were to be used to help the small South American nation “leapfrog” the carbon economy.

It was signed in 2009 when oil was not yet part of Guyana’s carbon equation. Norwegian disbursements have been delayed, in part because the discovery of oil has fundamentally changed the country’s energy mix.

Norway is Europe’s largest oil and gas producer and the OfD has been a flagship in its technical assistance to developing countries.

OFD’S ASSESSMENT

The Oil for Development Programme, housed at the aid agency Norad, currently provides support to 11 developing countries in their effort to manage petroleum resources in a sustainable manner.

An OfD assessment of Guyana’s request for assistance outlines the huge challenges the country is facing. Guyana has the “the world’s second-most prospective, underexplored offshore basin”, OfD writes, and Norwegian experience is “extremely relevant” given that Guyana’s oil production is offshore. Moreover, Guyana fulfils all six criteria for support from OfD and the probability of achieving OfD targets is considered to be high.

The OfD also acknowledges that the government “desperately needs” help. The OfD memo cites Minister Trotman’s own words: “the team at the Ministry of Natural Resources is very small, with only the Minister, the legal officer, a junior officer, and one geologist … involved in policy-making … We are aware of the resource curse and countries that have gone down similar paths … We would like to temper our expectations and excitement with common sense and try to ensure that we progress sensibly and with cautious optimism.”

Despite an apparent fit, the OfD Secretariat does not recommend including Guyana in its programme because it is not a prioritised cooperation country for Norwegian aid. OfD already has seven new countries in the preparation phase and resources are limited. There is a desire to concentrate aid on fewer countries.

The memo from OfD states that there is no Norwegian diplomatic presence in the country and this would make preparation and implementation of a programme difficult. It also points to Guyana’s “weak institutions, strained economic situation and the relatively widespread corruption in the state bureaucracy.”

NORWEGIAN MODEL

According to Trotman, a letter sent via the Norwegian Embassy in Brazil informed the Guyanese government earlier this year that Norway is unable to provide OfD support to Guyana for now, “but will do so once an opportunity came.”

While waiting for a change of heart in Norway, the minister says to Development Today that Guyana is trying to incorporate some aspects of the Norwegian model as it develops its petroleum governance infrastructure.

“One such feature of course is the establishment of a petroleum department, and another is the [Petroleum Commission of Guyana] that we will establish,” he says. According to the draft Energy Policy, Guyana also plans to create a sovereign wealth fund.

While bilateral cooperation in the oil sector is off the table for the time being, and Trotman confirms that there has been no further correspondence on that matter since February, Norway continues to push Guyana to follow through with commitments it made eight years ago regarding forest protection and the transition to a low-carbon economy. According to the Climate Ministry in Oslo, before any new payments can take place, Norway wants Guyana to finalise a roadmap for its clean and renewable energy transition. The Climate Ministry is also demanding a public policy document with formal status which explicitly states that keeping Guyana’s forests protected against intrusion remains government policy.

Just a month ago Norwegian Climate Minister Vidar Helgesen reiterated in a letter to the Guyanese Minister of Finance Winston Jordan that Norway’s commitment to forest protection and the “transition to near full clean and renewable energy” in Guyana is “as strong as ever.” Suggesting that the ball is in Guyana’s court, Helgesen writes: “We are awaiting your proposal for how to move forward.”

Millions of dollars are potentially at stake for Guyana as only a fraction of the original USD 250 million in Norwegian climate forest money has been disbursed. The full amount was supposed to be paid out by 2015. But to date, USD 120 million in funds already committed by Norway remain un-disbursed, and USD 60 million have still not been allocated.