Home Letters There is no need to sell Guyana’s share of profit oil directly
The response by the Department of Energy to grave concerns expressed about the invitation to select petroleum companies to Guyana for face-to-face meetings is disingenuous.
There is no need to sell Guyana’s share of profit oil directly. The share should be sold by the operator and should fetch the same price as the operator’s share. The price garnered for ExxonMobil’s share will be declared publicly to its shareholders and is a transparent, trusted and audited process. ExxonMobil cannot and will not lie to its owners (shareholders) and is closely monitored by capable institutions such as the US Securities and Exchange Commission (SEC). The same cannot be said for the process outlined by David Granger’s Department of Energy (DE).
The DE is being facetious when it suggested that “The short-term first phase beginning this week will focus on setting national benchmarks for selling Guyana’s portion of its crude in the future”. One, the benchmark will be set by the sale of the oil lifted before our turn comes and two, each batch of oil is quality tested and sold according to those results.
The DE confirmed that “Selected companies are invited to bid to buy Guyana’s product in the very short term”. The obvious question is why? Oil is sold on the world market daily, there is no advantage to pre-selling oil of unknown (but expected to be very high) quality. Should we, for example, accept a price US$2 higher than Brent Crude per barrel, it would seem a good deal unless the quality is higher and the world market price would be Brent plus US$8. In such a scenario, Guyana would have lost US$18 million due to undue haste. Given the present ravaged state of the Treasury, it is a risk we can ill-afford to take.
Then there is the issue of “selected companies”, the DE stated that “This strategy was employed upon serious consideration of advice given by an international team external to the DE”. The DE gave us titles of persons but significantly fails to name anyone. The DE gave us a lengthy three-point explanation of the ‘logic’ employed in reaching the decision to adopt a self-described “novel approach” – an examination of the three points is revealing.
In point one, the DE said the quality of the crude is not yet known. This is patently false; ExxonMobil has signalled that the crude is expected to be higher than the benchmark Brent. However, each shipment of oil is graded onboard the FPSO rigorously, oil companies do not buy or sell ‘pig in bag’. Any sale before testing is going to be below real value as companies will claim ‘risk’. Absolute hogwash!
Point two states “The DE has been advised, by the Crude Marketing Specialist, that in order to take Guyana through this limited short-term phase, a few high-quality IOCs with a global refining footprint and integrated oil value chains would be best given an opportunity to support the DE during this incubation and launching phase”. Guyana needs to get the best possible price for its share of profit oil, what it seems to have gotten is high-priced ‘con-sultants’. Keep it simple stupid should be a mantra over at the DE; it seems they are easily confused or misled. Is Kevin Granger an advisor on the ‘international team’? is it a team or a gathering of cronies?
Point three of the DE’s response states “Guyana’s main incentive in taking this approach is to establish a norm in terms of quality standard and quantity availability so as to prevent any possible down-pricing”. Again, if or quality is low, it will be tested before lifting and priced according to world prices, same if it is high, every shipment will be tested and priced this way, in a very open and transparent process. That is unless we deviate from the norm during the ‘face-to-face’ meetings.
The DE asserted that there is no untoward motive hidden in the request for face-to-face meetings and then, only with ‘selected’ companies, but I would suggest that when men with guns and masks are in our house, Guyanese do not have to wait to be robbed to know that they are bandits. We also know ‘salla-walla’ when we see it.