Guyana is doubling down on carbon credit deals in an effort to offset its environment footprint at a time when the fledgling energy exporter is developing vast offshore oil reserves.
The South American country signed an agreement with US oil and gas producer Hess Corporation in late 2022 and Finance Minister Ashni Singh told LatinFinance his office is ready to launch new deals when the market is right.
The deal with Hess, which is part of a consortium developing oil blocks in Guyana, represents $750 million worth of carbon credits over 15 years. That represents about one-third of the carbon credits that Guyana has to offer, Singh said.
“We received several other offers when we reached the agreement with Hess. We know
that there is interest,” he said in an interview on the sidelines of the World Bank/IMF annual meeting in Marrakech, Morocco. “We are watching the market. Timing is important to get the best possible price,” he said.
Carbon credits are considered the third income stream after domestic revenue
mobilization and oil revenue. While Singh said issuing a sovereign bond could happen in the future, the country wants to make a name for itself with its carbon credits.
The Hess deal is particularly important to the country as private companies, led by ExxonMobil, ramp up oil production more than 100 miles off the coast. More than 25 discoveries have been made in Guyana’s waters and the country will be producing around 1.2 million barrels per day by 2027.
Guyana’s first deal on forests came in the first decade of this century, when it got around $250 million from Norway.
Two-thirds of Guyana is covered by Amazon forests and President Irfaan Ali’s government wants to capitalize on the fact that the country has avoided the rampant deforestation that has blighted the seven other members in the Amazon Cooperation Treaty Organization.
It is ranked first among 33 nations worldwide in a new category known as high forest cover/low deforestation countries.
“Preserving standing forests is the most efficient way to combat climate change,” said the minister. “We have safeguarded our forests and we should be compensated for this.”
The government is also trying to reduce greenhouse gas emissions from its energy sector by transitioning from fuel oil to natural gas, hydroelectric plants and solar for power generation. It also also is taking pains to put in place mechanisms to make sure new transportation and agri-business infrastructure is green.
The plan is to add 50,000 acres of new farmland with irrigation and drainage
systems that ensure the units are environmentally friendly.
Singh said that while Guyana is on its way to becoming a big oil producer, its forests and
small footprint actually make it a carbon-sink country.
“People know what is happening with oil, but there is a parallel story with sustainable
forest management. In some ways, it is an even bigger story than oil,” he said.