Guyana will still control funds – Central Bank Governor
Guyana’s oil money offshore
The billions of dollars that Guyana will earn from the oil and gas sector will be held by an overseas bank, rather than Guyana’s Central Bank; an arrangement that Bank of Guyana Governor Dr Gobind Ganga said is normal.
When asked by this publication about Finance Minister Winston Jordan’s announcement that the oil money will be held by the United States (US) Federal Reserve Bank, Dr Ganga said that the money will still be managed by Guyana.
“What Central Bank will be doing; Central Bank will be managing the fund. It’s Government funds, but it will be held at the federal reserve like any other Government fund. It’s the Bank of Guyana that opened and took the necessary steps to operationalise the fund.”
Dr Ganga was also asked about whether the funds could be vulnerable to external shocks, since it would be denominated in United States Dollars and would be offshore Guyana. There have also been cases where the US has seized funds that belonged to other countries but were being banked in the US.
“No, it wouldn’t expose the money to external shocks. It is very safe at the federal reserve. That is just part of the picture. The fund is going into the federal reserve, it’s just like funds going into the consolidated fund. So when it goes there, you utilise it [according to your determination].”
The long-awaited Natural Resources Fund Bill was assented to by President David Granger in February of this year. It is a crucial piece of legislation that is intended to create a framework for saving and investing revenue from Guyana’s oil and gas sector.
All of this will represent a monetary windfall for Guyana, which will be saved and invested through a Natural Resources Fund. Previously, a green paper on the Fund was laid in the National Assembly.
Government had released the draft Natural Resources Fund Bill of 2018, which had proposed, among other things, a 22-member Public Accountability and Oversight Committee that would oversee the management of the Fund and provide checks and balances.
Part VI of the act speaks to the management of the fund and states that the Minister shall be responsible for the overall management of the fund and shall – (a) be responsible for preparing of the the Investment Mandate and include the items specified in section 36; (b) when preparing or admending the Investment Mandate, seek the advice of the Investment committee established under section 13;(c) be assisted by the Senior nvestment Adviser and Analyst; and(d) enter into an operatioal agreement with the Bank for the operational management of the Fund. Section 12. ( I) states that the Bank shall be responsible for the operational management of the Fund and shall manage the Fund in accordance with the Investment Mandate and the operational aggreement. It further noted that the operational agreement shall state (a) the fee charged by the Bank for the operational management of the Fund;(b) the liability for paying damages to the Government for losses that occur due to negligence or intent on the part of the bank or private mangers in managing the fund and (c) all other matters required for the effective operational management of the Fund.
The Act also provides for the committee to include a media representative proposed by the Guyana Press Association (GPA). Other entities that will have to propose representatives include the Guyana Bar Association; the Guyana Extractive Industries Transparency Initiative (GY-EITI); Transparency Institute of Guyana Incorporated (TIGI), the Guyana Consumers’ Association and the various trade unions.
The Act specifically excludes persons such as Members of Parliament, Ministry staff, persons of unsound mind, ex-convicts and the bankrupt from serving on the Committee. It also lists the functions of the Committee, which will include monitoring and evaluating the compliance of Government and other officials related to the NRF, with the provisions of the Act.
The Stabroek Block, by far the most successful oil block in Guyana, is 6.6 million acres (26,800 square kilometres). Esso Exploration and Production Guyana Limited is the operator and holds a 45 per cent interest in the Stabroek Block. Hess Guyana Exploration Ltd holds a 30 per cent interest, and CNOOC Nexen Petroleum Guyana Limited holds a 25 per cent interest.
A contract was inked on October 7, 2016, between the coalition Government, ExxonMobil and its partners in the Stabroek Block. In the renegotiated contract, Guyana agreed to a two per cent royalty for every barrel of oil, a 50 per cent share of profit oil and a US$18 million signing bonus.
Guyana’s profit sharing arrangement with ExxonMobil is for 50 per cent of profit oil. But with Exxon reclaiming its investment costs as cost oil, it means Guyana will initially get 12.5 per cent of profit.
Originally scheduled for 2020, first oil production has been moved up to this month. It is understood that the initial crude lifts will be 1 million barrels. With the first lift going to Exxon, Guyana is not expected to get its share until February to March.
Out of the contract, Guyana also secured the company’s agreement to set up a fund for social and environmental projects. Exxon has to contribute US$300,000 per year to this fund. The sums roll over and the company together with Government will determine which projects to fund.
The contract sets aside another US$300,000 per year to ensure Guyanese personnel are trained at local or overseas universities and conferences.