Home Letters Vice President Dr Bharrat Jagdeo vs Glenn Lall
Last evening, September 13th, 2022, Vice President Dr Bharrat Jagdeo honoured his commitment to appear on the Glenn Lall radio programme to engage Mr Glenn Lall on some burning issues Mr Lall regurgitate almost on a daily basis in his newspaper and his radio programme.
Emerging out of this very interesting exchange, at one point the Vice President offered Glenn Lall the opportunity that if he can bring together a group of private investors to participate in the gas-to-shore project that can generate electricity for US$0.03 per kwh as he claimed he can; Glenn Lall asked the question – “will they get a binding agreement” to that effect. The Vice President responded with a loud yes. On the other hand, Glenn Lall has a problem with the ‘stability clause’ in the Production Sharing Agreement (PSA) and refuse to comprehend and/or accept the Vice President’s explanation on the importance of this clause and the ramifications. The inference drawn, nonetheless, in which Glenn Lall unhesitatingly asked for a binding contract is no different from that which is obtained, inter alia, the stability clause in the PSA. In this respect, a binding contract between the Government and any private investor for the gas-to-shore project will pretty much guarantee the return on their investment and more so the rate of return they are seeking.
Of course, one can argue that Glenn Lall is just “gyaffing” and, therefore, not serious; so, he may never take this up. Glenn Lall must be commended, however, for taking on the Vice President. More importantly, the Vice President must be commended for taking the time to sit with Glenn Lall and answer his questions in the spirit of transparency and accountability and subjecting himself and the Government to public scrutiny. One would now expect that given the many misinformation that the Vice President proved and corrected on his show; that he will facilitate a more diverse and balanced debate on the subject matter in his newspaper. For example, Glenn Lall never published any of my articles that deal with oil and gas-related subject matters simply, because they are contrary to his views and position. I must say though that he has published other letters I wrote to the media that are unrelated to the oil and gas sector.
On the issue of the windfall tax, apart from the points the Vice President made about those countries, United Kingdom, Canada, and the United States being mature oil-producing countries, where they do not have stability clauses, the oil companies pay their regular taxes and the situation in those countries is altogether different in comparison to Guyana. Another important reason to note is that in the United States, for example, the oil and gas companies are heavily subsidised by the Government, which in turn allows for the oil companies to enjoy a higher internal rate of return (IRR). To substantiate this view, the average IRR as of 2019 for oil companies in the United States with subsidies averaged around 40 per cent and as high as 49 per cent in the case of Mexico; and without subsidies the IRR averaged around 25 per cent. In the case of Guyana, based on some recent analysis conducted by the undersigned, the average IRR for the four approved projects so far is about 22 per cent based on an average oil price of $60. This simply means that in those countries where windfall taxes are applied, the impact for the oil companies would be minimal considering the fact that they benefit from substantial amounts of Government subsidies that, in turn, result in much higher rates of return for their investment.