Guyana to transform its energy governance with IDB’s help

The $11.6 million loan will prepare Guyana for its transition 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 the sustainability of the energy sector in Guyana by contributing to the institutional  development  of oil and gas governance and the development of cleaner energy sources for electricity generation. The specific objectives of this loan program are first, to develop a management and planning framework for Guyana’s oil and gas sector; and second, to contribute towards the development of a policy framework so that Guyana may diversify its electricity generation matrix using cleaner or renewable sources.

Guyana’s new energy scenario, which will likely yield significant revenues for the government, represents a transformative shift in Guyana’s development trajectory. It embodies a crucial and unprecedented opportunity for economic growth and sustainable development. The conversion of short-term oil wealth into long-term, well-being hinges on the capacity of the Guyanese Government to adequately manage this new sector and enact productivity-enhancing reforms. If handled well, it can boost the overall standard of living for the country. However, there is considerable work to be done so that Guyana can enjoy the benefits of its recent -- and potential – oil and gas wealth. Too often resource-rich countries have become or remained poor as a result of inadequate resource management. Hence, there is an urgent need to improve the governance of Guyana’s oil and gas sector ahead of the start of production 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).

About the IDB

The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.

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More Information

Sophie Makonnen
IDB Country Representative in Guyana

Jaime Sologuren
Project Team Leader