Guyana may only have around 10 years to benefit from oil and gas – Commentary

Dear Editor,  ( Letter by Alexander Ramessar )

Future cities – Green EV revolution- electric cars

At this time, it is my opinion that the oil industry in Guyana will come to an end within a relatively short time frame. I am an Environmental Scientist educated at the University of Guyana and the University of Toronto with over a decade of Environmental Management experience in Ontario, Canada. The following are my personal views and opinions based on my investigation when making the decision to purchase an electric vehicle.

As seen with Guyana, existing technology is capable of finding reserves in the many billions of barrels which can keep this oil market going with a business as usual scenario. However, there is ongoing pressure from grassroots organisations to force decision makers to implement policy choices to meet emission reduction targets to tackle the global climate crisis. As a result society will increasingly adopt new green technology such as EVs which will weaken the demand for oil.       

There is general consensus that the supply of oil will be plentiful in the future but also that there will be many challenges on the demand side. The Center for Strategic and International Studies says that the total oil market is close to 100 million barrels per day with transportation taking 56% or approximately 56 million barrels per day and industry in second place with about 28% of the share.

Electric Vehicles are rapidly replacing Internal Combustion Engine (ICE) vehicles. The sales of ICE vehicles are going down because consumers are realising that EVs are superior. People are buying an EV as their next car or waiting for the right choice to arrive. In their report Global EV Outlook 2019, the International Energy Agency (IEA) says that in 2018, the global electric car fleet exceeded 5.1 million, up two million from 2017 and almost doubling the number of new electric car sales. EV adoption will accelerate even more when the ban of ICE vehicles by more than 10 countries which include France and the United Kingdom and 20 large cities around the world such as Mexico City start to take effect by 2030.

When the number of EVs on the road starts to reduce global oil demand by about 2 million barrels of oil per day, an oil glut will manifest itself. Production will have to be reduced in order to maintain prices but this will not be sufficient to stop the decline. The IEA says that by 2030 the number of EVs in the world could be more than 250 million which would cut demand for about 2.5 million barrels of oil per day. High cost oil extraction operations will become stressed at first followed by operations in places like Guyana. We saw an example of this when in 2014 oil was over produced by 1.5 million barrels per day and oil prices plunged from $100 (US) a barrel to around $40 (US) a barrel. The solution at the time was to cut production to stabilise the price. However when the oil glut is caused by EVs, cutting oil production will not be enough as each subsequent year more EVs will be on the market and it will become progressively worse for oil producers as oil demand continues to diminish. Oil producers will need to sell more and more to make up for the loss of revenue. This action will increase the supply and lower the price, hence the beginning of the cycle which will eventually render oil a near useless commodity and simultaneously put Guyana’s oil industry in jeopardy.

An emerging set of dynamics on the demand side will determine the life of the oil industry in Guyana but the situation will not be ideal. If oil producers can cooperate to keep oil prices high throughout the decline in oil demand then the life of the industry will be prolonged. However many analysts believe that it will be difficult to achieve harmony on this issue. Also in Guyana’s favour is the lower production cost which should keep the industry afloat for a bit longer. In addition, there will remain a large number of ICE vehicles in the developing world such that oil demand for transportation will not disappear but will trend to zero over time. Nonetheless, EVs will start to arrive in the developing world as well. If demand for oil from industry which is 28% of market share rises, then the effect may also be a delay in the decline of the oil and gas industry. However industry is already under pressure to adopt green technology to tackle the global climate crisis so the 28% is likely to decrease.

I think that the evidence is clear that the oil and gas industry will be under high stress by 2030 and there will be negative ripple effects that may be felt in Guyana right away. I believe that it would be wise for Guyana to have an action plan which can adjust accordingly for a future with no more oil revenue which may come in as little as 10 years. In my view, there should be no long term investments in oil and gas infrastructure. Guyana should invest in self-sustaining projects that can achieve dramatic improvements in the living standards of Guyanese. A great place to start is with the, ‘The Green State Development Strategy: Vision 2040’, which should be implemented aggressively before oil becomes obsolete.

Alexander Ramessar,
MEnvSci, HBSc, B.Eng. Mech.

Also read: https://www.teslarati.com/automakers-come-acceptance-ev-revolution-begun/

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Comments

  • kamtanblog  On 10/25/2019 at 5:14 am

    Exactly. !
    That’s why regulated production is
    essential …oil companies are just too
    greedy….Guyana should join OPEC
    to help regulate production.
    May be too late for that now …
    contract all signed and sealed.

    Unlike UK ..Norway has used its oil
    wealth wisely ….
    We must learn from past mistakes or
    we remain “idiots” aka jackasses !

    Go figure

    Kamtan

    • Sam  On 10/30/2019 at 7:13 am

      Ontario, Canada where they bite off their noses to spite their faces, Ontario is a bizarre outlier with many hypocritical environmental policies, a place where politicians and environmentalists cookup nutty ideas to fleece the unsuspecting growing immigrant population, as much as they constantly beat the multiculturalism drum, their environmental policies generally to squeeze more taxes from an over taxed population.

      Growth of EVs is mostly because of the government were taxing poor people to paybrich people to buy luxury EV.

      Like someone said Asia is left out of this equation, they are not even part of the Paris Agreement, and Canada will not even meet it’s targets.

      Canada’s emission scheme is basically to keep course and buy carbon offsets, and that is what this global warming, come climate change, come pollution scheme is all about, channeling new tax money to friends and themselves.

      • kamtanblog  On 10/30/2019 at 10:31 am

        Exactly
        Hypocritical jackasses elected by donkies.

        Kamtan

  • Quenton Dokken  On 10/25/2019 at 10:06 am

    I agree with Mr. Ramessar, hydrocarbon as an energy source is moving toward extinction. But, the hydrocarbon industry will not go quietly. First, we must acknowledge that utilization of oil/gas has created the standard of living that most of World enjoys today, providing energy for combustion and chemicals for manufacturing process and manufactured products such as plastics. Secondly, it is the industry that, if not controls, does exert tremendous influence on every government and society in existence. Thirdly, as the energy economy declines, to support the socioeconomics of all societies, we must have an alternative to provide jobs, business stability, and cash flow.

    The oil and gas industry exists for one purpose, to produce economic profit by meeting a market demand. As long as the demand exists, the industry will exist. However today, new environmentally sustainable options are being developed to replace the need for hydrocarbons, biofuels and oil and other chemicals from plants that can replace hydrocarbons in manufacturing processes.

    Eliminating the demand for hydrocarbons will drastically alter the world order. Those nations and societies that get there first will be the new rulers of the world. Oil can bring Guyana into the 21st century, but wise planning for the future will take it beyond. Will greed for immediate gain drive the process? Or, can the good people of Guyana find a more sustainable pathway?

    • kamtanblog  On 10/25/2019 at 11:27 am

      In a decade or two the boot will be on other foot. It’s not a case of one or the other.
      More a case of one lesser than the other.
      Not one replacing other more one complimenting other.
      Alternatives the cleaner source.
      Survival of the most adaptable/diverse
      of the species.
      Darwin re-incarnate !

      Kamtan

  • brandli62  On 10/28/2019 at 5:03 pm

    The analysis of Alexander Ramessar describes a highly plausible scenario of dropping or at least stabilise demand for oil due to the transition from combustion engines to electrical ones for transportation purposes. In addition, industrial nations are restricting the use of oil and natural gas for heating purposes in favour of renewal energy sources. What is missing from the equation is the fact that population growth in Asia and Africa will counteract this general trend. Furthermore, as pointed out by Quentin above, oil is an important resource for the chemical industry, where is been used to produce, for example plastics. Given these facts, Guyana should not refrain from long term investments in oil and gas infrastructure as suggested by Alexander Ramessar, but focus on refining crude oil on shore on Guyanese territory in order to move up the value chain. For example, a small state-of-the-art oil refinery could provide fuels to the Caribbean nations, Suriname, French Guyana, and possibly Central American countries. Furthermore, it could become the nucleus of a petrochemical industry drawing from knowhow in Trinidad and the US. The quality of Guyanese oil is considered very good as it is low in sulfur. Hence, demand for oil of lesser quality or oil sands from Canada will drop first before it will hit the Guyanese oil reserves. Let’s be smart and plan the future accordingly.

    • kamtanblog  On 10/28/2019 at 5:34 pm

      Sorry do not share your enthusiasm
      for oil and it’s by products “plastics”.
      Renewables are complimentary
      at present but will change in next
      decade as alternative energy sources
      replace oil…dirty energy source.
      Developing countries will follow the
      developed countries….becoming less
      dependant on oil….hopefully learning
      from mistakes of past.
      Free market principle
      Refining in competition with triniland
      et all is not way forward.

      My take

      Kamtan

  • Muhamad Aarif  On 10/30/2019 at 10:16 am

    True. But interesting things about oil and gas industry is that they always said and forecast that there will be shortages of supply. But somehow the supply lines seems to maintain its capacity 😂
    .
    https://aarifbillah.com/category/oil-gas-notes/

  • Quenton Dokken  On 10/30/2019 at 10:24 am

    In the 19th century, oxen drawn wagons and sailing ships delivering commercial goods gave way to steam driven trains which gave way to diesel electric trains, bunker oil driven ships, trucks, and planes delivering commercial goods. The point, change and progress is inevitable and will continue through the 21st century and beyond. The challenge is to not let change destroy the natural system on which all life on Earth depends!

    In 1979 The IXTOC oil spill occurred in the Bay of Campeche spewing oil into the Gulf of Mexico for 10 months. In 2004, in the Gulf of Mexico a production platform owned by Taylor Energy was destroyed by a storm and landslide. Today, 15 years later, those wells are still leaking oil into the waters of the Gulf of Mexico, and the owner says nothing can be done. In 2010, the Deepwater Horizon spill occurred and today Brazil’s beaches are covered with oil from an “unknown” source. How is the government and people of Guyana prepared to deal with such eventualities?

    Trust and hope is not the answer! The government and people of Guyana must be in control! Yes, the production of oil in the territories of Guyana is inevitable. Socioeconomic forces will accept nothing less. But, Guyana would be well served to look beyond today’s realities of a hydrocarbon driven economy to a more sustainable strategy for the future.

    • kamtanblog  On 10/30/2019 at 10:41 am

      Simple simon says
      Two natural resources Guyana has
      plenty of….Forests and Fresh water.
      83.000M2 with 780.000 souls …
      Land is also plentiful.
      Focus on these three natural resources
      and the future is bright.
      Oil and it’s byproducts (plastics) certainly
      in the frame long term.

      Kamtan

      • Emanuel  On 10/30/2019 at 11:50 am

        Simple Simon says Guyana has plenty of “Forest”.

        That’s news to me.

      • kamtanblog  On 10/30/2019 at 3:40 pm

        Amazonia Forrest (jungle)

        Kamtan

      • Emanuel  On 10/30/2019 at 10:05 pm

        “Forrest”. ?

  • kamtanblog  On 10/31/2019 at 3:15 am

    Ok Amazonian jungle…

    Kamtan

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