What is the World Bank doing in Guyana?

The discovery of a massive oil field brought ecstasy to the people of Guyana in 2015. When I reported from there in 2016, I talked with people who dreamed their lives would soon change: A cab driver who told me about free education and cheap health care, a dockworker who couldn’t stop talking about the recently opened shopping center. Georgetown, the capital of Guyana, was bustling with activity. 

Since 2015, U.S. oil company ExxonMobil and its partners have made 26 big oil discoveries offshore Guyana. Rystad Energy, Norway's largest independent energy consultancy, has predicted that Guyana’s total annual oil revenues could approach $30 billion within 10 years. The International Monetary Fund estimates the economic output will be $14.1 billion in 2025, almost three times as much as in 2019. The future oil dollars could lift Guyana, one of the poorest countries in the region, out of poverty.

The discovery offshore Guyana had an unlikely sponsor: The World Bank. The World Bank invested $20 million into the Petroleum Resource Governance and Management Project in Guyana. Part of the program is to draft Guyana’s new petroleum laws, addressing matters concerning the landing, installation and operation of pipelines, among others. For $1.2 million, coming from the World Bank’s investment, the Guyanese government hired the same law firm used by ExxonMobil to broker this deal.

The role the World Bank plays in Guyana’s legal transition into an oil market is not always self-evident. Of all the multilateral development banks, which are financial institutions established by sovereign states, the World Bank Group (WBG) is the world’s largest source of climate finance to developing countries. The World Bank’s funds are designed to support mitigation and adaptation actions that will address climate change. Yet of all the multilateral development banks, it is World Bank that has given the most funding for fossil fuel projects since the Paris Climate Agreement. Since 2015, the World Bank invested over $12 billion in fossil fuels, a study from the German civil society group Urgewald has shown. $10.5 billion was used to finance new direct fossil fuel projects.

The apparent contradiction has diplomats and activists scratching their heads. At the recent COP26 in Glasgow, Scotland, the World Bank was singled out as “an ongoing underperformer” on climate change by Selwin Hart, special adviser to the United Nations (UN) secretary-general on Climate Action.

Guyana itself has so far has seen few benefits from the discovery of its oil. According to The Guardian, Guyana earned only $309 million from the new industry since 2015, while ExxonMobil and its partners pocketed some $1.8 billion during the same period. Reports about the lack of safety measures in the operation of the oil field, lack of clarity about insurance for a possible oil spill and an illegal environmental permit are also causing growing discontent in Guyana. “There has been a big shift in how people feel about oil,” says Guyanese environmental lawyer Melinda Janki. “First people wanted it because they were told it would make them rich. Now they realize it’s not making us richer, but poorer. The government is not in control of what’s happening offshore,” says Janki.

In May 2021, two Guyanese citizens, represented by Janki, filed a lawsuit against the Guyanese government. They demanded that the government cancel its contracts with ExxonMobil, arguing that the large-scale oil and gas extraction violates the constitution, which guarantees citizens the right to a safe and healthy environment. It is the first constitutional climate case in the Caribbean. “No one can dispute the global climate crisis anymore,” says Janki. “The production of fossil fuels is accelerating global warming and is a threat to human rights.”

The World Bank is controlled by the governments of member nations, which have the ultimate decision-making power within the organizations through their shareholdings of the Bank on all matters. Countries have different amounts of voting power on how much of the Bank's capital stock they hold, explains Luísa Abbott Galvão, an International Policy Campaigner at Friends of the Earth US. The US, China, Germany, the UK, Japan, and France, who are among the world’s biggest polluters, are the biggest stakeholders of the World Bank and therefore hold the most voting power. 

Although the World Bank committed to align its financing with the Paris Agreement and in 2019 to no longer finance upstream oil and gas projects – meaning exploration, drilling and extraction – that doesn’t mean they have ceased financing the fossil fuel industry, Abbott Galvão says. “They continue to enable financing going to fossil fuel projects through other, more indirect ways.”

One way the World Bank is still supporting coal and oil and gas industries is through technical assistance, policy reforms and government budget support. These forms of financing can lead to national regulatory changes relating to the energy sector. In doing so, the interests of the local government, let alone its citizenry, are not always the main focus. The World Bank is targeting the growth of fossil fuel sectors across at least 25 countries, according to Heike Mainhardt, a senior advisor at Urgewald. Examples of policy reforms supported by the World Bank include tax breaks for coal and gas in Mozambique, higher electricity tariffs resulting in higher profits for new coal fired plants in Pakistan and facilitating the expansion of natural gas in Indonesia.

In at least a dozen countries, technical assistance from the WBG resulted in an increase of fossil fuel investments, Mainhardt found. “People need to understand that yesterday’s technical assistance is today's mega fossil fuel project,” says Mainhardt.

In May 2020, for example, the International Development Association (IDA) - the part of the World Bank that helps the world’s poorest countries - approved financing for a gas power plant in Myanmar. Described on the World Bank site as  a ‘Power System Efficiency and Resilience Project, the $350 project is a new gas power plant to expand gas power generation and replace older units to provide electricity to around 300,000 people living in the Yangon region. In other words: the World Bank is financing a new fossil fuel project in the name of ‘efficiency’.

The website of the World Bank states that IDA and the International Bank of Reconstruction and Development (IBRD), another arm of the WBG, did "zero fossil fuel financing in 2020.”

A World Bank spokesperson writes The Ballot in an e-mail, “Thank you for bringing the Myanmar project (…) to our attention. The page you cite now clarifies that the World Bank committed no new fossil fuel lending operation in fiscal year 2021 (July 2020-June 2021).  The project does not finance upstream natural gas development.” The World Bank has reacted to Urgewald’s study, describing it as ‘distorted and unsubstantiated’, stressing that the WGB has committed nearly $9.4 billion to finance renewable energy and energy efficiency in developing countries from 2015-19.

“We are one of the largest providers of sustainable energy financing to people in developing countries,” wrote the World Bank’s spokesperson in an email. “The World Bank only selectively supports natural gas as a transition fuel when there are no other readily viable options in helping countries expand reliable and affordable access to energy for the poor, displace carbon-intensive coal and oil, and enable integration of a higher share of renewables.”

But even if such a commitment were strictly followed, it may come into conflict with the bank’s climate goals. Recently the International Energy Agency released a report stating that there can be no new coal, oil and gas development if the world is to meet emissions-reduction targets. According to several expert organizations, the world is currently on track to produce 120% more fossil fuels in 2030 than would be compatible with the Paris Agreement. Simply put: there is already far too much investment in fossil fuel production.

“The WBG has a very important signaling role. When they come in, investors are more likely to think it’s safe to invest,” says Abbott Galvão. “If the World Bank, as a public development bank, had invested in renewables 15 years ago, these markets would be much more competitive now because they would have the backing of the WBG. Instead, the WB helps legitimize a lot of fossil fuel projects.”

According to the World Bank’s spokesperson, the Bank will align its new operations with The Paris Agreement starting July 1, 2023, and bring its private-sector arms into compliance starting in 2025.

In Guyana, meanwhile, the government is doing everything they can to make a quick profit from the oil and gas revenues. The country has decided to build a 220km-long subsea gas pipeline to transport gas to shore. The funding of the $900 million project would be taken from “cost oil’ - a subsection of the production that the operator can take for compensation – by ExxonMobil. With their program in Guyana, the World Bank is assisting the government in setting up the oil and gas policy framework. 

Since last year ExxonMobil has been flaring gas due to a broken gas compressor. This flaring emits toxic particulates directly into the air. “The Guyanese people want Exxon to stop flaring now,” says environmental lawyer Janki. She mentions that the World Bank wants Guyana to join the World Bank’s Zero Routine Flaring Initiative.  But flaring is already illegal under Guyana’s environmental law. The World Bank initiative would actually let ExxonMobil flare until 2030. Janki adds: “They are helping Guyana transform from a carbon sink to a carbon bomb.”