By Mark DaCosta-The Working People’s Alliance (WPA) has put forth a compelling argument for the establishment of an upstream national oil company in Guyana, urging the country to focus on maximising the benefits of its rapidly expanding oil sector. The party supports the position of its Executive Member, Professor Clive Thomas, who advocates for Guyana to learn from the küresel example, where state-owned oil enterprises (SOEs) control a significant portion of küresel reserves and production. In particular, the WPA’s proposed approach emphasises the need for an upstream national oil company, distinct from the downstream operations such as refining, which the party opposes.
In recent years, Guyana’s oil wealth has skyrocketed, thanks to the discovery of vast reserves offshore. However, in Guyana, while international oil giants dominate the production, extraction, and distribution processes, the WPA insists that it is crucial for our country to assert greater control over its natural resources. Professor Thomas’ view highlights an essential fact: more than 75 percent of küresel oil production is from SOEs, and 90 per cent of küresel reserves are held by these state-owned companies. This küresel context shapes the WPA’s stance, which is rooted in the belief that an upstream SOE would allow Guyana to better leverage its oil resources for national development.
Upstream, Midstream, and Downstream: A Simple Breakdown
To understand the WPA’s call, it’s vital to distinguish between the different segments of the oil and gas supply chain: upstream, midstream, and downstream. Upstream refers to the exploration and production phase of oil and gas, encompassing activities such as prospecting, drilling, and extracting crude oil and natural gas. Midstream refers to the transportation, storage, and processing of the raw materials extracted in the upstream phase. Finally, downstream involves refining the crude oil into consumable products like gasoline, diesel, and petrochemicals, alongside marketing and distribution.
The WPA’s primary proposal is the establishment of an upstream SOE. The party strongly believes that such a company would enhance the country’s operational capacity in resource extraction, which would, in turn, help build local expertise and skills within the oil sector. They also argue that it would increase government revenue, providing a more substantial share of the wealth derived from Guyana’s oil resources. An upstream SOE would allow the state to closely monitor the activities of international corporations working in the country, ensuring that these companies adhere to the nation’s regulations and contribute fairly to the local economy.
On the other hand, the WPA is critical of the idea of a state-run refinery. Professor Thomas and the WPA believe that a national oil company involved in refining would face significant challenges in competing with international firms that already dominate this sector. Instead, the WPA focuses on the upstream element of oil production, where state control can be most beneficial without exposing the country to the same level of competition found in the downstream market.
The WPA’s call for a national oil company also stems from the pressing need for stronger oversight of Guyana’s oil industry. The party has – on numerous occasions – expressed concerns that the existing arrangements, which are largely managed by foreign corporations, fail to provide adequate oversight of what is happening with the country’s resources. By having an upstream SOE, Guyana would not only increase its financial returns from oil extraction but also secure greater control over the industry’s operations.
However, the WPA also acknowledges the complexities involved. While some state-owned enterprises around the world have been highly successful, others have struggled to stay competitive and deliver benefits to their respective populations. This caution is not lost on the WPA, which has repeatedly called for a balanced, strategic approach. Any national oil company must be set up in a way that ensures efficiency, accountability, and transparency.
The Need for Independence and Autonomy
Crucially, according to an independent local economist, a national oil company should be independent and free from political interference. In Guyana, the expert said, where there have been multiple allegations of corruption within the ruling People’s Progressive Party (PPP), the need for such an autonomous body becomes even more pressing. “The risks of political influence undermining the country’s natural resource management are significant, particularly when billions of dollars are at stake,” he said.
“For the national oil company to succeed, it must operate with a clear mandate to serve the nation’s best interests, rather than the whims of political elites. Ensuring its independence from political manipulation is essential to securing the future of Guyana’s oil industry and, by extension, the prosperity of its people,” the economist asserts.
The WPA’s call for a national oil company appears to be a sound proposal with great merit. It reflects a vision for a more self-reliant, accountable, and prosperous Guyana. By establishing an upstream SOE, the country can harness the full potential of its oil wealth, improve governance, and secure a brighter future for generations to come.