Guyana could end up worse off with oil

Jun 05, 2017 News

– Jagdeo

The Government is giving Guyanese the wrong impression that the coming of oil is an automatic saving grace. There is a real possibility that Guyanese can wake up worse off in 2020 than they are now. That is the contention of Opposition Leader Bharrat Jagdeo.
At a recent press conference, Jagdeo spoke about the absence of “realism” in the minds of many government officials and said that they are passing the dream onto Guyanese.
The Opposition Leader said that because government expects that Guyana will become rich overnight due to oil, it is forsaking the traditional sectors. “This is dangerous,” he said. Further, Jagdeo said that the money that is projected to be derived from oil is not, by itself, enough to save Guyana.
The Opposition Leader referred to the current deal struck between the Government of Guyana and ExxonMobil where the profit from oil production will be shared equally and government will benefit from a two percent royalty. He said that that deal does not guarantee much for Guyana and that the only assurance is the royalty. This, he said, is because the profit that is to be divided is gross, meaning, profit after cost would have been deducted.
Jagdeo said that there is a real possibility that for many years, there will be no profit when the cost is deducted.
“The one thing that is sure is the royalty; you may not get profit for many years. So we are looking at two percent royalty.”
Oil is currently being sold at around US$50 dollar per barrel. Jagdeo estimated Guyanas royalty come 2020 using that figure.
He said that two percent of US$50 works out to US$1per barrel. This is to be multiplied by the amount of barrels that Exxon plans to produce a day100,000. That works out to US$100,000 per day which when multiplied by 365 (one year) works out to about US$36M which exchanges to about GY$8B a year.

Opposition Leader, Bharrat Jagdeo

Jagdeo said that the government has signed an agreement with DDL “that will cost the treasury $80B dollars and they are only getting $8B in royalties per year. They have already given up 10 years of future royalty of the oil that we produce by this one agreement. In the meantime the rest of the economy is sinking.”
Jagdeo said that government officials are busy walking around spreading hope of a better life and “the good life” but with no action in place to see the realization of those “dreams”.
He said that many are being offered jobs, money and gas “but there is no realistic basis for these things.”
“So the reason I use those assumption…it is not a massive sum coming from the royalty, it a fairly decent sum but when compared to a single action that this government did it amounts to nothing at all…they have given up more,” said Jagdeo.
The Opposition leader urged, “People must not sit and wait and think that the oil can save us.”
He said that even if the price of oil per barrel raises and more is derived “we need to use it wisely, not to kill the rest of the sectors. Jobs have to be created elsewhere. The oil industry is not labour intensive and therefore I am arguing that we cannot neglect the traditional sectors.”
Jagdeo questioned, “What if in 2020 the price of oil is US$20…it was 14 dollars at one time…one year, who would have thought that in six months the price of oil could have dropped from over US$120 to US$28 dollars. This is the realism that I am trying to get people to understand.”
Jagdeo said that oil can be blessing or it can be a curse. “It is a curse if you misspend the money and change relative prices and kill off the other sectors of your economy that generate jobs and wealth for people. It has been a curse in many countries because of misuse of the money.”
While Jagdeo is urging the government not to forsake traditional sectors, he too, has in the past, been accused of doing the same.

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