Macroeconomic Management Issues in Oil-Producing Guyana

This chapter presents an introduction to the oil and gas industry, touching upon its national macroeconomic and management challenges in the present institutional and political environment. It begins by outlining the scale of the discoveries and production prospects and the legal superstructure for production and sharing of proceeds between the operating companies and the Government. Based on the provisions of the production sharing agreement (PSA) between the Government and the operators, the chapter explores the process of generating earnings for Guyana. Further, the chapter reviews the balance-of-payments and fiscal impacts of the operations of the industry. The review of the balance of payments focuses on the effects of actions of autonomous agents in the economy, the oil companies, other private investors, and consumers, while fiscal analysis is more focused on Government policy and action. The chapter serves to highlight the complexities of managing the oil economy and the continued need for macroeconomic prudence, not with standing the upsurge in resources available to the Government as a result of oil industry operations.