How should a new oil and gas country develop reserves for the benefit of its people – and its economy?
- 8 August 2022
- Posted by: Future Energy
- Category: Energy
The top priority for any country developing new hydrocarbon reserves will probably be to get revenue and jobs as fast as possible.
These countries would probably also like to ensure that the industry and its regulation has transparency, the nation builds its internal capacity, and internal regulatory expertise. It is likely to have some interest in its ESG credentials to enable the best financing terms, and using external expertise in the right way. But if these things are to happen, it needs to be done in a way which does not delay access to income too much. Managing expectations of stakeholders will be key.
For internal capacity building some countries may have pushed too hard in their ‘local content’ requirements for working with local companies. The challenge is setting the requirement at the right level – and also providing the right local and international training at all levels from trades to professionals.
Internal regulatory expertise development makes the difference between a well regulated country and a poorly regulated one. Good regulation does not mean bureaucratic hold-ups. To the contrary, a good regulator can ensure that projects keep moving – as we see the UK’s North Sea Transition Authority doing. It is useful if regulators have the expertise to know what realistic costs are, so they can allow companies to make enough profit to make their ventures worthwhile, without allowing them to raise costs beyond reasonable levels.
ESG requirements and especially decarbonisation could get in the way of first revenues – if there is gas produced together with oil, the fastest solution is to flare the gas. Natural gas resources should enable local industrial development rather than just export the gas via LNG or pipeline. But here a country should be able to make a balanced decision about what is in its best interest, bearing in mind that climate change can cause more hurt to developing countries, and high GHG emissions may make it harder to obtain reasonable funding.
External expertise is needed to fill gaps in the expertise your country has until that talent can be developed. Capacity building is critical. Use expertise in a way which will enable it to be systematically passed to your country.
Future Energy Partners has been looking at two countries which are developing oil and gas reserves on a large scale for the first time – Guyana and Namibia. This could be a rough outline of where they should go as they develop their nascent oil and gas businesses, seeking to get income streams quickly but also achieving a quality ESG regulatory framework, transparency, low carbon emissions, internal skill development, and regulatory expertise.
For further advice on how a developing country could benefit from our approach, and to discuss working with us, please let us know.