EDITORIAL - Planning for life with oil

There is, it seems, renewed and heightened optimism among Jamaican energy officials of oil and natural gas being found either on land or off the island's coast, or both.

We hope that these expectations are realised, and in that regard, wish to associate with the observations in this newspaper, by Roderick Rainford, the Jamaican former secretary general of the Caribbean Community. For, as Mr Rainford, suggested, prudent management of a country's wealth, especially when newly and quickly acquired, is important, lest, as the late Michael Manley supposedly, and inelegantly, put it about a Caribbean neighbour, "it runs through you like a dose of salts".

In March, the Government formally opened bidding for 19 offshore and four onshore exploration blocs, the second series of bids this decade. At the time of the latest effort, Dr Ruth Potopsingh, the then CEO of the Petroleum Corporation of Jamaica, was confident that updated geological data would make Jamaica "attractive to the exploration industry".

Officials upbeat

Of course, such optimism about oil and gas being discovered in commercial quantities in Jamaica is not new, although expectations have ebbed and flowed over the past since the first wells were sunk here.

More recently though, especially since the drilling rights were assigned for eight offshore blocs in the middle of the decade, officials have been particularly upbeat in their expectations, even though the handful of exploration wells sunk by franchisees have not had the forecast shows, despite the belief that at least 28 billion barrels of oil and many trillions cubic feet of natural gas lie below the sea off the south coast.

While there is no certainty this will happen, Mr Rainford is right that the Jamaican authorities cannot wait until oil/gas begin to flow, if it does, before they begin to plan how it will all be managed. We are not too perturbed about the technical stuff, such as framework agreements for the exploration and sharing of resources, which we believe to be within the capabilities of our technocrats.

Timely forward planning

However, we share Mr Rainford's warning of the need for "timely forward planning" with regard to "the deployment of that portion of the results that accrues to Jamaica".

"There would be the challenge to control the natural urge to indulge in populist extravaganza," he said. In other words, beware of politicians and their wasteful show projects and their propensity for distributing pork.

In this respect , we note two examples.

The first is Trinidad and Tobago at the first oil price shock and the sudden inflow of cash, which were inadequately husbanded because of low absorptive capacity and the politicians penchant to open the treasury when they see money.

The second, and more significant, is this country's own experience with the bauxite production levy imposed by the Manley government on bauxite/alumina firms in the mid-1970s. The money was supposed to go towards infrastructure and capital projects to help prepare the economy for life after bauxite, a finite resource.

Over three decades, more than US$1 billion flowed into the fund, but there is little to show for it. It went mostly to recurrent expenditure and other feel-good programmes, some of which had the effects of Mr Manley's proverbial dose of salts.

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