• Friday, March 29, 2024
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Guyana strategy: What Nigeria can do with private capital

Guyana strategy: What Nigeria can do with private capital

Guyana, a tiny South American country, is attracting fresh private capital on oil and gas assets to develop critical infrastructure across its local economy, whereas Africa’s biggest oil producer is struggling to attract private capital to build its energy sector.

Unlike Nigeria, who squandered its 1981 oil boom, Guyana, South America’s third tiniest oil country with a population of about 780,000, is bracing up for an oil boom that could catapult it to the top of the continent’s rich list and ensure that its newfound riches benefit all Guyanese.

But history carries a warning for Guyana. The discovery of big oil in other developing nations like Nigeria has exacerbated existing corruption, leading to the new oil wealth being squandered and stolen – being known as the oil curse.

To avoid the ‘oil curse,’ Guyana is looking beyond the oil export revenues from the Exxon-operated projects off its shores. The country is attracting private capital to large oil and gas discoveries to build up an economy powered by its own energy resources.

This summer, the government of Guyana said it was looking for partners to invest in a $900-million gas-to-energy project for a natural gas pipeline from one of its most valuable oil fields, the Liza onshore.

Read Also: Nigeria’s oil industry faces another difficult year in 2021, says Platt

The planned 225-kilometre (140 miles) pipeline from the Liza area to the Wales Development Zone (WDZ) is expected to feed a gas processing plant and a natural gas liquids (NGL) facility, capable of producing at least 4,000 barrels per day, including the fractionation of Liquefied Petroleum Gas (LPG).

A power plant with a total capacity to generate 300 megawatts (MW) of electricity and an industrial park that could use gas, steam and/or electricity are also part of the gas-to-energy project.

“Guyana needs to convert its abundant resources. We need you. We welcome you, and we urge you to remember the name Guyana and to keep the name Guyana in your plans for growth and development, both in country and by businesses and sectors,” Peter Ramsaroop, CEO at Guyana’s government agency GoInvest told Bloomberg on the sidelines of the Dubai Expo.

“Guyana must have the gas and hydropower to be able to bring a competitive economy to the point where we can depend on our own energy to deliver our goods and services,” Ramsaroop said.

Exxon, for its part, “expects to make significant progress over the next few years in cooperation with the Government of Guyana to advance a gas-to-energy project,” the supermajor told Bloomberg in a statement.

Guyana’s government bets on the project, which it expects will come on stream by late 2024, to more than halve its electricity costs, seen by the private sector as prohibitive to investment in the country, the South American nation said.

The government expects the gas-to-energy project to revolutionise and significantly improve the ease of doing business in Guyana, it said in July.

The gas from the recent massive oil discoveries could transform Guyana’s economic fortunes forever.

While Guyana is not only growing its economy but also making plans to further increase its oil production per person by having a favourable attractive investment condition, Nigeria is still battling insecurities, hostility from host communities, increasing cost of oil and gas projects and unfavourable government policies all of which are making it more expensive for IOCs to operate.

Analysts say Nigeria does not appear a good investment destination compared with advanced countries at the moment, despite its status as a frontier market with growth potentials and market accessibility.

According to a global investment trends monitor report released by the United Nations’ Conference on Trade and Development (UNCTAD), Foreign Direct Investment (FDI) inflow hit $2.6 billion in 2020, the lowest since 2005.

Unlike Guyana, Nigeria remains “Exhibit A” of the so-called resource curse, particularly when you split its oil production across the population.

Niyi Awodeyi, CEO at Subterra Energy Resources Limited, says Nigeria’s oil production per head has been in a miserable state in the last 10 years.

Despite huge oil reserves, Nigeria has the 19th lowest production per capita among top 20 oil-producing countries in the world; the country produces less than a barrel per 100 people, only China produces lower at 1/3 of a barrel per person.

In comparing this to the Gulf States, widely accepted to be the most oil-rich in the world, Saudi Arabia produces about 28 barrels per 100 people; Kuwait produces 60 barrels per 100 people, while UAE produces 32 barrels per 100 people.

Although Nigeria produces the most oil in Africa, it also underperforms against its African peers with regards to per capita production; it produces less oil per person than Angola and Algeria.

“Nigeria is not expanding its oil potential despite having an expanding population,” Awodeyi notes.

Some experts have recommended that for Nigeria to turn the tide against its declining oil and gas investments there must be deliberate multi-agency efforts to bring about needed reforms. But the efforts must start with bringing credibility to both fiscal and monetary policies.

The government’s many failings with attracting foreign direct investment, most especially in the oil and gas sector, have meant Nigerians have grown poorer as economic growth is slower than population growth.