Georgetown: A US$11.6M loan will prepare Guyana for itstransition towards becoming a major oil and gas producing state.
Relying upon a$11.64 million policy-based loan from the Inter-American Development Bank(IDB), this project is designed to support the strengthening and thesustainability of the energy sector in Guyana by contributing to theinstitutional development of oil and gas governance and the developmentof cleaner energy sources for electricity generation. The specific objectivesof this loan program are first, to develop a management and planning frameworkfor Guyana’s oil and gas sector; and second, to contribute towards thedevelopment of a policy framework so that Guyana may diversify its electricitygeneration matrix using cleaner or renewable sources.
Guyana’s new energy scenario, which will likely yieldsignificant revenues for the government, represents a transformative shift inGuyana’s development trajectory. It embodies a crucial and unprecedentedopportunity for economic growth and sustainable development.
The conversion ofshort-term oil wealth into long-term, well-being hinges on the capacity of theGuyanese Government to adequately manage this new sector and enactproductivity-enhancing reforms. If handled well, it can boost the overallstandard of living for the country. However, there is considerable work to bedone so that Guyana can enjoy the benefits of its recent — and potential – oiland gas wealth. Too often resource-rich countries have become or remained pooras a result of inadequate resource management. Hence, there is an urgent needto improve the governance of Guyana’s oil and gas sector ahead of the start ofproduction in 2020.
The agreed-upon policy commitments of the first tranche of the program are as follows: (1) creation of the Department of Energy (DE) within the Ministry of the Presidency to take over responsibilities related to the governance and development of Guyana’s oil and gas sector; (2) approval by the DE of a draft roadmap to develop Guyana’s oil and gas institutional framework, and; (3) design of a model contract for future Production Sharing Agreements (PSA) by the DE and presented to Guyana’s Ministry of the Presidency. The agreed-upon policy commitments for the second tranche are: (1) a DE functions manual establishing its organizational structure, budget and staff allocation, approved by the Ministry of the Presidency; (2) a PSA set of protocols and mechanisms for contract management; and (3) an oil and gas depletion policy designed by the DE and presented for approval to the Ministry of the Presidency. Finally, the program will aid Guyana’s Government with the development of a policy framework to diversify and promote the sustainability of Guyana’s electricity generation matrix.
The loan is funded in two components totaling US$11.64 million. The first component will total US$5.82 million from the IDB’s Ordinary Capital, disburse within two years, with a grace period of 5.5 years, and an interest rate based on LIBOR. The second component will total US$5.82 million from the IDB’s Concessional Ordinary Capital, disburse within two years, with a grace period of 40 years, and 0.25% interest rate. The executing agency will be Guyana’s Ministry of Finance (MoF).
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