Dear Editor,
The Minister of Business said, at a private sector event, that earning US$300 million from Guyana’s oil annually is no chicken feed; and that the 2% royalty is decent, since the royalty earned on gold in the past eight years would amount to just one year of earnings from oil.
I would not want to call the Business Minister disingenuous, as he was when he rightfully criticized the misleading comparisons between the Guyana Production Sharing Agreement (PSA) and the Ghana Oil Contract.
The Business Minister cannot compare the royalty earned on gold with the profit and royalty earned from oil.
For the Minister of Business to ignore the more than $2 billion in cost recovery and profit that ExxonMobil would be walking away with each year is to assume that the Minister is now singing for his supper.
The Guyana Gold Board saw earnings from the precious metal last year at over of US$0.25 billion (US$250 million).
This versus the projected US$300 million to be earned from the 2 per cent royalty together with profits earned on the 50/50 split—that is, providing oil prices stay at an average US$60 per barrel, and not tank to the US$30 per barrel as it had it recent years.
Lower oil prices could very well mean that Guyana would earn little to nothing on royalty, while ExxonMobil secures all earnings to meet cost recovery.
Industry experts have long concluded that safeguards against seemingly infinite cost recoveries being added by oil companies is also near impossible.
Having decimated the economy by gobbling up the country’s foreign reserves, increasing national debt to staggering levels, together with the loss of hundreds of millions more in foreign currency from the sugar industry, the David Granger-led Administration has clearly run out of answers, or has been bought off.
Its answer is to now employ the executives in the PSC to do its public relations bidding, and to say that all is well with the ExxonMobil contract.
Why else would a Minister of Business tell business executives platitudes and respond selectively to outlandish media reports, instead of speaking to how the Government intends to safeguard contracts for the private sector out of the billions to be turned over for ‘cost oil’ and ExxonMobil’s daily operations? Gaskin wants you to believe that there is nothing ridiculous or lop-sided about this contract, and that if the business community buys into the propaganda and becomes distracted by the negativity, they are likely to prepare themselves for the transformation.
From all appearances, the ExxonMobil PSA is a done deal—a song sung by ExxonMobil’s Kimberly Brasington, Minister Gaskin, and each of the PSC executive members speaking.
There is money still to be made by the local private sector and Guyanese people. Oil exploration companies don’t by themselves do a lot of the actual work; that, instead, is contracted out and paid for using oil revenues, and is deducted as cost recovery.
One would have expected the Business Minister to, for example, speak to the administration’s efforts at assisting private sector companies with support for training and raising certification standards to international levels; or support the University of Guyana for specialized O&G training; or perhaps set up a new school altogether in this regard.
One would have expected the Business Minister to speak to the proposed Sovereign Wealth Fund—itself reducing the annual US$300 million available to the country in the year it is earned, since some has to be set aside.
The PSC executives, in February last, would have held several high level forums and meetings with the executives of the top oil exploration companies currently operating, or looking to operate, in Guyana.
One would have expected PSC Chairman Eddie Boyer to present a report of some collaborative effort in conducting some sort of gap analysis in the private sector, or regarding some special considerations for the local business community, given the newness of the sector and the record pace of its development.
What the business community instead heard from its leader was a lamentation that Guyanese couldn’t afford to compete — an area that Gaskin could have shed some light on — and must instead look to partner with those already established in the business.
Then again, it just could be a case of whoever pays the piper…, but no amount of wordplay by the Minister would hide the reality that Guyana has been handed the short end of the stick in a contract that a foreign interest demanded renegotiated.
Peter Ramsaroop,
Ph.D., MBA
Chairman, Vision
Guyana (Political
Action Group)
