Business Minister belittles Guyana’s gold royalties

…juxtaposes oil and gold earnings at PSC seminar

In the first year of oil production, the Government of Guyana could earn about the same that it has earned from the last eight years of gold production, Business Minister Dominic Gaskin has said, claiming that more royalties could be accrued from oil as opposed to the gold sector, which at present is Guyana’s biggest export earner.
But more than that, Guyana will receive in the first year of oil production which is expected in 2020, two per cent of the gross value and 50 per cent of profit oil. Based on the production of 100,000 barrels per day and at current oil price of about US$60 per barrel, this amounts to in excess of US$300 million in

Government revenues in the first year.
These were the arguments put forward by Gaskin on Tuesday while he addressed an oil and gas seminar at Duke Lodge, Kingston, Georgetown, which was organised by the Private Sector Commission. The Minister asserted that while some people have been repeating on a daily basis that the contract is bad for Guyana, this does not make the statements true.
“Let’s compare this with what is earned from the gold industry. And I’m not knocking gold (I like gold), but gold is Guyana’s biggest export earner by far and Guyana has been exporting gold for about 150 years. The last eight years have been the best years ever for gold production in Guyana; both in terms of the amount of gold produced and the value of gold produced and exported and also the value of royalties and taxes collected by Government,” he stated.
The Minister noted that Government has collected just over US$300 million in royalties and taxes from all the gold produced in Guyana over the last eight years. “That can’t be chicken feed. The gold produced over the last eight years from which the Government would have earned this US$300 million would have been sold for approximately US$5 billion. For a similar value of oil under this so-called chicken feed oil contract the Government would have earned around US$700 million.”
Participants, mostly members of the Private Sector, were also told that by 2022 when the second phase of development starts to produce oil, Government revenues will increase to approximately US$800 million per year. As such, Gaskin said for anyone to assert that Government is selling out and giving away Guyana’s oil does not hold weight.
“Could we have gotten more? You can always get more. You can also get less. But the fact remains that you can’t just start off with no industry and no proven reserves and want to play hard ball with investors who have years of experience in the field and who can easily take their business elsewhere without any major consequences,” he added.
While admitting that there is limited experience and expertise, or even suitable training programmes to help build the capacity here, Gaskin said it is an industry which requires high levels of up-front investment, well beyond what can be raised either from local sources or by local companies. As such, he posited that returns on that investment are also affected by price fluctuations and this increases the degree of risk for the investor.

Contract
Despite popular public opinion that the oil contract signed by Government, the Minister defended the deal stating that he would not try to convince anyone that it is the best contract in the world, and while he thinks there’s room for improvement, he believes that nothing is ridiculous or lop-sided about the contract.
“I believe this is a decent deal and I say this not just as a Government Minister but as a proud Guyanese citizen. I will not stand here and try to sell you something that I myself don’t buy. And my views transcend politics and this is why I don’t blame the previous Government for the terms and conditions of the contract they negotiated. In the context of an offshore basin that had not yet been de-risked it may not have been prudent to demand more,” he stated.
Moreover, Gaskin attempted to provoke thought among the participants by saying, “Who knows where we might have been today had that agreement not been signed. And just for clarity, the agreement that everyone is talking about is an agreement signed since 1999 which both parties agreed to modify in 2016. There was no formal negotiation process. The company had a valid agreement with the Government of Guyana which was not up for renegotiation.”
He therefore argued that there was no obligation on the part of the company to enter into any negotiations with Government.
“You don’t unilaterally amend a contract after the other party has invested hundreds of millions of dollars under the terms and conditions of that contract. Governments have to behave responsibly when it comes to business dealings, especially if we want to do more business down the line,” he explained.
Further, the Minister said he strongly believes Guyana is now in a much stronger position to negotiate the remaining blocks based on Guyana’s national priorities.
According to him, the interest is there and many of the world’s leading international petroleum exploration companies want a “piece of the action.” He said, when it comes to allocating the remaining areas, Government will be hiring a firm with international expertise to guide that process.
Oil production is set to begin in Guyana in 2020. (Samuel Sukhnandan)