President assents to Natural Resources Fund Bill

– legal framework now possible for saving, investing oil wealth

By Jarryl Bryan

The long-awaited Natural Resources Fund Bill has been assented to by President David Granger, a crucial piece of legislation that is intended to create a framework for saving and investing revenue from Guyana’s oil and gas sector.
This was announced by Minister of State, Joseph Harmon, who was addressing a post-plenary press conference. According to Harmon, the President assented to the Bill on January 23. He explained that the law will cater for a number of things, including a public oversight committee.

The NRF bill now creates a legal framework for savings and investments from oil earnings

“The legal framework for the Fund includes provisions for public oversight, management, the nature and source of deposits, withdrawals including parliamentary approval of amounts to be withdrawn, eligible investments for its resources, accounting and auditing of its records and codes of conduct for members of its oversight and investment committees.”
“Included in the act is the first schedule which outlines the procedures that will be used in calculating the fiscally sustainable amount of the Fund,” Harmon explained. “Also included in the second schedule (are) the ceilings and floor for investment (out of) the Natural Resources Fund for the purpose of long-term savings.”
According to the Minister, some of the avenues that Government will use for investing are treasury bills, bank deposits, sovereign and corporate bonds, equities, derivatives and commodities.

After its 10th discovery of oil in the Stabroek Block, ExxonMobil has estimated the recoverable resource in the block to be 5 billion oil-equivalent barrels. At US$50 a barrel, that equates to well over US$200 billion. In addition, an independent assessment, or competent persons report, had found that 2.9 billion barrels of oil existed in the Orinduik block.
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.
Then there is the issue of the Fund managers. Investment firm Merrill Lynch has, for some time, expressed an interest in being involved in managing Guyana’s oil finances. In fact, representatives from the firm had reportedly met with Central Bank Governor Dr Gobind Ganga. The Opposition has urged that the vetting process for the Fund manager be a rigorous one.
The Stabroek Block 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.
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.