Exxon sprints ahead

Feb 26, 2018 Features / Columnists, Peeping Tom

No one likes to get a bad deal. And Guyana has gotten a rotten deal from ExxonMobil. The deal amounts to highway robbery.
To better understand what has happened, let us assume that you have a property and its market value is worth $100M but you do not know this because you did not go out and seek a valuation. So up comes a real estate agent, and he tells you that he will pay you $50M.
Now that sounds like a lot of money to you and you are so excited that you take it, not realizing that the agent knows that the property is worth double that amount.
So you feel you got a good deal because you are rich but the fact of the matter is that what has happened to you constitutes highway robbery because you have only received half of what you have earned. Do you really think that when the truth hits home, you will ever feel good, knowing that you were robbed.
So instead of leaving to your children and their descendants an inheritance of $100M, you are leaving to them a mere $50M. In other words, you are robbing future generations of your family.
This is what has happened to Guyana. There is no doubt that things will improve with oil, all other things remaining equal. In fact, the IMF predicts GDP growth skyrocketing when oil production begins.
But interestingly, the revenues that Guyana will earn from oil within the first three years will not, on a per capita basis, be anything to shout about.
The calculations have been done and they are staring the public in the face. The Peeper has used a US$65 per barrel price for oil and this works out to a mere US$40 per month for every Guyanese. This is small change for an oil producing country.
In other words, each person in Guyana would be entitled, if the oil revenues are distributed within the population to a monthly allowance of eight thousand Guyana dollars. This is based on gross income of US$300M per year and production of 120,000 barrels per day.
The IMF has used some more conservative numbers. They ought to know since they have experience in these sorts of matters. They have conservatively used an oil price of US$ 55 per barrel and production at 100,000 per day for the first three years.
Based on these numbers, they conservatively estimate that Guyana’s oil revenues (in Guyana dollars) will amount to G$27.4 billion dollars in the first year, doubling in the second year and increasing slightly to G$56.9 billion in the third year.
When this is divided among the population, it works out to each Guyanese obtaining $3,000 Guyana dollars in the first year and $6,000 Guyana dollars in the second and third years.
This is the ‘chicken feed’ that Guyana is expected to receive for its oil reserves. This is why the ExxonMobil deal is being described as a case of highway robbery.
It is not that Guyana will not get anything. It is just that what it will receive is nothing near what it ought to have been receiving had a better deal been negotiated.
Exxon has dealt Guyana a poor hand. It has taken advantage of Guyana’s inexperience. Exxon is the largest publicly traded oil company in the world. The net worth of Exxon is worth more than that of Guyana. Exxon had no reason to treat Guyana in this way. It is unconscionable.
Guyana ‘s oil reserves represent asset to Exxon. They have already earned millions in the form of stock value appreciation because of Guyana’s assets. The least they could have done was to be fair to Guyana. Instead they have shafted Guyana.
The discovery of oil was seen as a God-send to Guyana. It has now, because of what has been negotiated, being seen as a case of devil taking the hindmost and in our case, it is the country which is taking up the rear position while Exxon sprints ahead.

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Exxon sprints ahead

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