Oil and gas revenues and their role in developing climate-resilient agriculture in Guyana
By Dr. Arlington Chesney
News Americas, NEW YORK, NY, Mon Aug 29, 2022: This article supports the position that “disproves” the suggestion that Guyana should not pursue the development of its oil and gas sector as the country’s contribution to the global reduction of greenhouse gas emissions. It posits that these revenues (earned by both the public and private sectors) are needed to fund a “transformational” agenda to develop a climate-resilient agricultural sector. It is developed in the following context:
First, Guyana will continue to maximize its potential revenue from exploiting its recoverable oil and gas resources. The suggestion that he would do otherwise, in order to help reduce global greenhouse gas emissions, was effectively “rejected” by many, including the internationally renowned Guyanese expert on climate change, Dr. Ulric Trotz. In a recent webinar from the University of Guyana (UG), he noted that pledged funds from the developed world, to help small island nations and low-lying developing countries, like Guyana, take the steps to adaptation (and mitigation) needed, were not readily available. In addition, it is generally accepted that oil and gas will have a key role in achieving the objectives (especially transitional ones) of the Paris Agreement.
Second, at a recent meeting (June 2022) of Caribbean Heads of State and the President of the United States, food security and energy security were identified as two of three priorities for urgent collaboration. The importance and interdependence of these two areas cannot be overstated. Energy security concerns not only oil and gas but also downstream raw materials, including fertilizers. Therefore, it is closely linked to food security, the achievement of which is directly linked to sustainable and climate-resilient agriculture.
Third, Guyana has been subject to many extreme weather events. For example, floods in 2005 and 2021 and severe droughts in 2014 and 2015. There have been serious negative consequences, such as reduced food production; poor human health, linked to inadequate nutrition and the spread of disease; damaged ecosystems and infrastructure; emotional/mental trauma and consequent reduction in worker productivity.
Fourth, the majority of Guyana’s socio-economic activities reside in its narrow low-lying (mainly below sea level) coastal plains, which are economically important, with 90% of the population and the most important productive sectors. These include agriculture with key commodities – sugar, rice, poultry, root crops and vegetables.
Fifth, coping (resilience) issues and procedures are mainly addressed.
The use of oil and gas revenues is necessary to develop a climate-resilient agricultural sector: a transformational program, similar to the onshore gas project. Its benefits transcend the agricultural sector.
This important transformation agenda must be “all industry”, “all government” and “all society”. That is to say an inclusive collaboration.
In terms of “the whole industry”, to date, the Exxon consortium has projected its recoverable resource at 11 billion boe. With current world prices (discounted by 20%), the estimated value is approximately US$0.8 trillion, the profits of which are to be shared between the government and the three companies. In July 2022, Christopher Ram, based on audited accounts, reported that in fiscal year 2020, with only one FPSO operational and in production in its early stages, (a) the three consortium companies had gross revenue total of $545 billion with an after-tax profit of $353 billion, and b) that of the government was $351 billion.
Consequently, the Government cannot be solely responsible financially for this Programme. The private sector should be an integral part of this initiative to minimize the resource curse.
It is essential that the private and public sectors, to support the achievement of a climate-resilient agricultural sector, undertake ‘soft’ and ‘hard’ activities respectively. Some of these activities are identified in the government’s draft low-carbon development strategy, 2030.
The Consortium recognizes its need to participate in “soft” activities to support the country’s sustainable development. Exxon supports “sustainable economics through investment in education, research, sustainable management and conservation of the country’s vast ecosystems” and Hess undertakes “world-class healthcare development in Guyana”. There is no direct link to climate-resilient agriculture, although Exxon supports “the work of UG’s Green Research and Innovation Centers”.
It is recommended that these enterprises can support “intangible activities”, such as planning, education and research for development. Climate change will cause many alterations to plant and animal life that require documentation, review, planning, analysis, dissemination and training for the successful implementation of this transformational agenda. Technical areas will include (a) plant breeding, to obtain new varieties of field crops that tolerate salt (due to sea level rise), higher night temperatures and increased regularity of wet periods and/or extreme droughts, (b) integrated economic pest management with increased levels of insects and diseases as a result of droughts and floods, respectively, (c) agronomic practices to facilitate sustainability of protected agriculture , (d) enhancing the contribution of value-added components along value chains, (e) managing/conserving internal water resources with possibly lower water tables, especially in non-coastal areas , and (f) optimization of appropriate computing and “smart” agriculture.
With government approval, a company may develop “parental” relationships with one or more of the following institutions, the National Institute for Agricultural Research and Extension, the Livestock Development Authority of Guyana, the departments concerned within the UG and the Guyana School of Agriculture, in order to improve their human resources. and physical capabilities at the planning, laboratory and field levels. The “twinning” device, introduced by Hess for its relationship with the public health sector, can be examined. Potential candidates are the universities of Florida and Tuskegee which have long-standing relationships with Guyana.
As mentioned earlier, the government could undertake “difficult activities” requiring significant institutional, human and capital resources. These would include (a) sea and river defence, (b) drainage and irrigation, (c) land management/settlement, (d) physical infrastructure and (e) possible institutional realignment. This requires an all-of-government, unanimity approach to allocating significant sums from the Natural Resources Fund to this “transformational” program. Current expressions, at all levels of government, of the importance and need for sustainable and climate-resilient agriculture must continue.
These activities, in particular maritime and river defense and drainage and irrigation, should be concentrated on (and not limited to) the coastal zone due to its population density and economic importance, including agriculture.
Extensive commercial cultivation of inland fish and shrimp, rice and sugar cane is recommended. With efficient technical and administrative management, the selected products can be marketed profitably. However, they will above all contribute to the establishment of the other three pillars, social, environmental and institutional, of sustainable national development. These cultures provide a public good. They could benefit from industrial incentives and benefit from special major infrastructure works, such as feeder roads and regional reserves, in addition to traditional activities such as sea and river defence.
Such preferential treatment is not unheard of. For example, in highlands, farmers in upper watershed levels have been encouraged to follow good agricultural practices so that communities in lower levels have access to usable water. The general public must be sensitized to understand and appreciate that this preferential treatment is necessary for sustainable national development in the medium and long term. Therefore, the Whole of Society approach must be placed at the forefront of the national agenda.
Large agricultural establishments, except those necessary to contribute to the economic optimization of capital-intensive infrastructure, are not recommended for coastal areas. Indeed, humanitarian efforts may be required to relocate farms that are determined by climatology to be subject to repeated and unavoidable flooding.
In summary, it is recommended that Guyana maximize its oil and gas revenues with a significant allocation to the development of a climate-resilient agricultural sector. The recommended “transformational” program is focused (and not confined) to the economically important low-lying coastal zone. It will facilitate sustainable national development by testing and strengthening the four pillars, including the institutional which is not normally identified as such but which is the glue that binds the others together. This transition program has characteristics that could contribute to having a stronger Guyana economically, particularly with regard to its agricultural and food sector, and, by extension, regional food security. Therefore, it requires “Whole Industry”, “Whole Government” and “Whole Society” approaches.
EDITOR’S NOTE: Dr. H Arlington D Chesney is a leading Caribbean agricultural professional who has served his country, the Caribbean and the hemisphere. He is an Emeritus Professional of the Inter-American Institute for Cooperation on Agriculture, and in 2011 was awarded the Guyana Golden Arrow for his contribution to agricultural development in Guyana and the Caribbean.