Boat done gone ah falls!

Dec 03, 2017 Features / Columnists, Peeping Tom

What difference is the release of the Exxon Mobil contract going to make? Boat done gone ah falls! The deed has been done. A renegotiation took place and the public was no wiser as to the full details of that deal.

What was made clear was that the contract could not have been made public, because of advice from the government’s lawyers. No one really bought that excuse, which only created the impression that the government had something to hide.

The lawyers either have backpedalled on their advice or the government has buckled under public pressure to make the contract public. Either way, the government has failed to convince the nation that it had justifiable grounds for not making public the contract.

The oil industry is too important an economic resource for the government to have been cryptic about its agreement with Exxon Mobil. This was not the ideal start to a country’s oil industry. It will raise a great deal of concerns about the role of the government and its ability to ensure the best interests of the Guyanese people.

Guyanese are expectant about the riches which will flow from oil production. But they should really be cautious, because there is no indication that Exxon will meet its deadline for commencing production in the Stabroek block.

Exxon in fact has been doing quite well without Guyana. The recent increases in crude oil prices on the world market have landed Exxon Mobil a revenue windfall. Exxon Mobil has registered impressive revenue returns over the past nine months, which signals a reversal of concerns over its operations.

Guyana’s contract was negotiated when the price of oil was half of what it is this month. Guyana therefore may not have gotten the best deal.

The increase in the price of crude is not yet at a level to encourage oil production from Guyana’s fields. The decision as to whether Exxon will commence production from Guyana’s fields in 2020 is one that will depend on a number of factors, including political risks, Exxon’s other investments, and its growing interest in renewable energy.

There are a number of reasons, however, why production may not commence in 2020. The stabilization of the situation in Venezuela where Exxon has bigger stakes and which, ironically, increases the political risks of the investments in Guyana. Exxon has just pulled out non-essential staff out of Papua New Guinea because of political risks. Exxon is yet to announce the launch of oil production at a major field in Vietnam’s waters because of political risks. And this field was discovered one year before Guyana’s.

Discoveries made decades before Guyana’s oil find are only now being developed by the company. Exxon Mobil has started production on its Hebron project which it has held since 1980. That find is far bigger than the one in Guyana. It is also expanding its refining operations in the United States. And the oil giant is spending US$1B a year in research on renewable energy. All of this suggests that the oil dream which Guyanese were looking forward to may not materialize by 2020.

In this context, it was a highly unwise decision of the Granger administration not to make public its contract with the oil giant. This only adds to the political risks on an investment.

The government had nothing to lose by making the agreement public. The fact of the matter is that there have been no massive protests over the fact that Guyana has negotiated a 2% royalty from Exxon when the average international royalty for an investment of that nature is about four to five times that amount.

Guyanese have accepted this rotten aspect of the deal – one of the few things made public – so why the continued clamouring about the contract?

What difference will it make if when the contract is made public it us discovered that there was indeed a signing bonus which is not reflected in the public accounts? The contract is already signed.

What difference will it make if it is discovered that Exxon is indeed funding Guyana’s legal bill for its controversy with Venezuela? Guyana is a divided country and because of this, there is not going to be murmur of protest from the government side, even if a scandalous deal is uncovered. So forget about that deal. Boat dun gone ah falls!

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Boat done gone ah falls!

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