Gas-to-energy project can help Guyana counter infamous ‘Dutch Disease’- Regional Economist

By Vishani Ragobeer

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The infamous ‘Dutch Disease’ is one that Guyana has been warned about in the development of its nascent oil and gas sector but Regional economist Dr. Justin Ram believes that the forthcoming gas-to-energy project will help counter this threat.

The gas-to-energy project is slated for Wales on the West Bank of Demerara (WBD). Through this project, it is proposed that natural gas produced by ExxonMobil’s operations in the prolific Stabroek Block will be used to fire a power plant producing 300 megawatts of electricity.

And Dr Ram, during an online forum on Tuesday, said that this project should augur significant benefits for Guyana- particularly generating affordable, accessible and more reliable electricity.

With Guyana using natural gas to produce cheaper electricity, Dr. Ram also acknowledged that local economic activity such as agriculture and manufacturing can be heightened and this would, in turn, produce more jobs.

Beyond that, however, he said that this project could have a key benefit: countering the infamous dutch disease.

In their submission to a 2020 working paper series on Guyana at the University of the West Indies (UWI) – Cave Hill, Dr. Ralph Premdas and Dr. Vishnu Ragoonauth explained that the dutch disease is worrisome.

Because of this phenomenon, an economy may experience “distorted development” where there is a “boom” in one sector of the economy (such as the oil and gas sector) while other sectors (like agriculture and manufacturing) may be left shrunk, neglected or marginalised.

With this disease, demands from the booming sector may subtract from capital investments and labour in the other sectors, thereby making them less competitive.

And Dr Ram said, “It is typically well-known that when countries exploit hydrocarbon resources, they can experience dutch disease.”

He too acknowledged that this phenomenon can lead to un-competitiveness in other sectors of the economy. But, the gas-to-energy project can be a boon.

“… with the reduction in cost of energy, it can counteract the dutch disease, helping to make other sectors competitive,” the regional economist emphasised.

Reducing the cost of energy could lead to a reduction in the cost of production in the agricultural and manufacturing sectors, for example; resultantly, these sectors may still be able to compete against the attractive oil industry.

Though he backed the gas-to-energy project, Dr. Ram also advised the government to ensure that the gains are equitably transferred to people.

He also emphasised that natural gas should be used as a transition fuel, helping to wean the country off of its dependence on fossil fuels and move towards more renewable energy sources like wind, water and solar energy.