“Guyana has a Fantastic Window of Opportunity” TOTALTEC CEO Lars Mangal Sets Out Priority for Guyana
March 17th, 2020 – Georgetown, Guyana – TOTALTEC CEO Lars Mangal has given an exclusive interview to Deutsche Welle, adding a local, experienced perspective to the voices of global commentators. In this news release excerpts from this interview are complemented by additional commentary on the unique situation of Guyana.
‘Guyana has no time to lose’, says Mangal.
The Guyanese entrepreneur and oil expert that worked for 30 years for international companies such as Welltec and Schlumberger and now runs his own supply company, TOTALTEC, in Georgetown's elegant Subryanville district. Mangal is involved in everything needed to help companies quickly become operational in Guyana, with a bias to developing local content. He recruits, trains and develops operational personnel for the oil business, constructs office & living accommodation, and encourages the involvement of local people in the coming oil boom.
Global committees and commentators have discussed the deal negotiated by Guyana and ExxonMobil Corp. – the oil company at the heart of the offshore discovery – at length. The deal with Exxon Mobil will provide Guyana with nearly $170 billion USD in revenue over the coming years. And yet, despite the incoming influx of wealth for the country, there are some around the world who believe the 2016 deal negotiated by Guyanese Resources Minister Raphael Trotman could have played out differently.
Deutsche Welle: Mr. Mangal, Guyana is in the spotlight of the oil industry thanks to discoveries at sea. At the same time, there is a lot of criticism on the deals, which provide for the US oil company Exxon and Guyana to share the profits 50/50. In other countries like Mexico, the state retains 75 percent of the net revenue. As an expert, what do you think about this?
Lars Mangal: Many commentators have no idea what they are talking about and are lost in the trees preventing them from seeing above the forest. This is a fantastic opportunity and an excellent contract. It's good for Guyana, for the people and for Exxon.
TOTALTEC: It is worth noting that the offshore discovery in Guyana carried significant risk. There had been 40 dry wells drilled over a period of decades. ExxonMobil Corp. found nothing for years, but remained steadfast in the exploration despite other global oil companies pulling out. Shell pulled out of the relationship with ExxonMobil, and they are a very skilled exploration company.
What is good about this discovery for Guyana?
Mangal remains firm in his views; “We now have the opportunity to change this country, to drive development, to modernize the economy and to lift every Guyanese household out of poverty.”
His stance on Guyana’s position is pragmatic. Exxon is one of the most capable oil companies in the world. Mangal argues that the offshore project in Guyana is highly technically complex, involving drilling underwater to depths of up to 1000-3000 meters. A comparable feat, technologically speaking, would be a moon landing. Guyana does not have the expertise to carry out such a complex project. Smaller companies in Guyana do not have the capital nor the knowledge, but should take this opportunity to learn, so that in future, they do.
Mangal admits that this future opportunity does not negate criticism of the contract signed today:“Of course, as with all agreements, there may be room for improvement. The question is whether we have time to do so, and will it create overall value. The deal was viewed as fair at the time, considering the risk profile and similar discoveries in other countries. It is now time to move on and begin to drive better deals in the future, grounded by a better understanding of the offshore assets and a stronger Guyanese negotiating position.”
TOTALTEC: This raises a critical question: can Guyana quickly develop the skills to control their own data for the offshore assets? An overall understanding of the subsurface will require a national data repository, developing subsurface geoscience and data science expertise to be able to generate, analyse and draw insight from all the data which tells the story of the reservoir; from seismic to core to logs to production to abandonment decisions. Exploration, development and production are in many ways both art and science – operators may decide to abandon exploration or change development strategies for their own reasons (including commercial drivers that may be inconsistent with how the host country would approach things). It is also not unusual over the life of a field that it is sold to another operator. Guyana requires the expertise to participate in these changes, and adapt contractual arrangements accordingly. In all situations, the fairest deal for Guyana will require objective, unbiased recommendations by geoscientists, supported by accurate data from the subsurface. This is a critical capability for Guyana to develop. Related to this, a requirement must be placed on all operating companies to provide all data to the country of Guyana, and bear the costs associated with this.
DW: But oil also places a small country like Guyana at the behest of a large company like Exxon.
Mangal: “Exxon is a competent partner, and Guyana is now the crown jewel in Exxon's portfolio in view of the state of the international oil business and the great exploration success they have had in Guyana. Both parties have a stake in success here. It has to be looked at as a strategic partnership. The country has an unprecedented opportunity for a paradigm shift. But time is pressing. Our goal must be to produce 2 to 3 million barrels of oil a day as quickly as possible.”
Mangal insists that Guyana should focus instead on investing wisely, so that over time the economy and country evolve in a way to be less dependent on oil. Many agree that this evolution requires good governance and a spirit of cooperation.
On the matter of cooperation; a recent article published by the New York Times shed light on the current lack of cooperation within Guyana:
The start of oil production in December is expected to nearly double the country’s gross domestic product in 2020, according to the International Monetary Fund, and multiply in years to come. [...] the winner-takes-all attitude that has marred the elections is weighing heavily on Guyana’s economic prospects as it enters the oil age, said Ralph Ramkarran, a prominent local statesman who led a largely Quixotic campaign for a small multi-ethnic party. “The thinking here is, ‘why share when you’re winning?’” he said. “Until that’s fixed, it will remain a place of suspicion and economic underdevelopment.” The stakes could not be higher.
Quote courtesy of the New York Times: https://www.nytimes.com/2020/03/05/world/americas/guyana-elections-oil.html
DW: Many states have already failed due to the "oil curse". One country that is repeatedly mentioned as a positive counter-example is Norway, with its oil fund. Is this also the model for Guyana?
Mangal: “Norway is an example, but it is not the model. Norway was an undeveloped country with farmers and fishermen. The transformation did not only happen because of oil, but also because of good governance, democracy, government support for science, the obligation to use local labor and materials and the knowledge transfer to indigenous Norwegian enterprise.”
TOTALTEC: The North Sea discovery is different to the discovery in Guyana in many ways. Principally, Norway also shared the North Sea with The United Kingdom, Netherlands, and Denmark. This was a multi-country, major oil province that developed over a period of decades, initiated and driven by the Arab oil embargo of the early 1970’s. It remains a successful province some 50 years later. It is worth noting that many fields have been sold among operators during the period, in particular later in their lives.
It is also worth pointing out that each of these countries took ownership of the data that provided understanding of their precious resource. They took it upon themselves to develop deep expertise in geoscience, creating university programs that now turn out graduates who work in the industry worldwide. This is partly why there are so many Norwegians in the oil industry today; it is nothing to do with an oil fund that was created 20 years after oil was discovered. It is because Norway country recognised a need for skilled local labour, and set about creating the education system that would deliver.
Oil funds are not a guarantee of sustainable success either. Angola, Nigeria, Malaysia and many other countries created oil funds. Today, many of these funds have been discredited and dwindled through corruption; by politicians – and their relatives – and local companies often aided by international investment firms. Without responsible governance and transparency, oil funds represent opportunities for illegal and unjust behaviour by those with access to the fund.
There is one major difference for Guyana from those who have gone before; this discovery has happened in the age of the internet. Active social media communities in Guyana, local voices propagated globally online, and international scrutiny are all powerful forces that drive transparency and equality.)
TOTALTEC: Protecting Guyana, and Guyanese Families
Guyana does not need to follow in the footsteps of the countries that came before, even those that navigated their discoveries successfully. There are a number of possibilities available to Guyanese people, if they approach this discovery differently.
According to Mangal, the creation of a household fund, in which every Guyanese is a stakeholder, would democratise access to oil wealth in a highly transparent way. For example, the fund could receive 60-70% of oil revenues, and each citizen can draw a certain allocated amount out of the fund to go towards building a house, buying health insurance, sending their children to private school, or other such uses.
A household fund structure, says Mangal, “... leaves Guyanese people free to decide for themselves how they wish to participate in oil revenue. It stimulates other sectors too, distributing the oil wealth to the healthcare sector or construction industry, encouraging healthy competition among private companies and reducing pressure on government by incentivising and building an alternative to public sector services.”
It’s a bold idea, one that Mangal believes would be a step towards modernization and poverty reduction, lifting every Guyanese household out of poverty within a decade.)
A final question by Deutsche Welle encourages a long, hard look at the current political situation in Guyana;
DW: Are politicians up to the challenge?
Mangal: “... we lost time after the vote of no confidence in Dec 2018. In my opinion, what is important for development is a policy with a local focus, i.e. part of the materials and labor must be sourced and developed locally. Guyana needs to focus on overcoming divisions. The opposition and the government should agree on a binding long-term oil agenda. Guyana also needs to ensure good governance and accelerate marketing and exploration in other blocks where new contracting opportunities and models will emerge.”
Mangal concludes decisively; “As a matter of priority – and with a sense of urgency – we must focus on developing an oil agenda that better serves the people of Guyana. It is of utmost importance”.
TOTALTEC Oilfield Services is focused on the success of the oil industry in Guyana for the benefit of the country, its people, and partner companies. It does this through three areas: people, partnerships, and facilities. Qualified and motivated Guyanese develop through the International Petroleum & Maritime Academy. Partnerships prioritize products and services that are starting points to grow from, creating new Guyanese led companies. Examples are Guyana Shore Base, Inc. providing support to offshore operations and Jaguar Oilfield Services offering a complete range of lifting equipment and inspection services. The 94% Guyanese TOTALTEC workforce includes 8 nationalities with over 160 years of international oilfield experience. https://www.totaltec-os.com