Nut butter and bread for Guyana

Mar 04, 2018 Features / Columnists, Peeping Tom

Long ago, if you were dirt poor, and you went to the shop to buy a 1 cent bread, you used to ask the shopkeeper to put a dash of salt butter on it.
That came as a complimentary, depending on the goodwill and mood of the shopkeeper. If he was in a bad mood, you got no butter on your bread.
But if he was in a good mood, you would get a thick coat of salted butter on your 1 cent bread.
This week, Guyanese were greeted with ecstatic news. Guyanese will not return to the days of begging shopkeepers to put a little butter on their bread.
ExxonMobil announced its seventh major find in the Stabroek block.
It is said that this find will eventually allow for an increase in production to 500,000 barrels per day. The earnings from this means that Guyanese will be able to put some nut butter on those three loaves of bread which they can buy from the money to be earned from oil revenues.
ExxonMobil’s latest announcement of another productive well in the Stabroek block coincides with concerns that Guyana’s share of oil revenues will not increase as the company intensifies production.
Most production sharing agreements these days provide for either sliding scale royalties or higher production sharing ratios as production increases; meaning that as production increases, the country’s share of the oil increases.
Also, as the price of oil rises, there are either increased taxes or bonuses applied such as a windfall tax. In the contract, which ExxonMobil signed with Guyana, all these aspects are conspicuously absent.
There is no sliding scale royalty. The contract does not cater for a larger profit split for Guyana as production and prices increase.
Guyana got a warped deal and all Guyanese, regardless of your political affiliation, should feel outraged by what was signed, after it was known that Guyana had struck oil and ExxonMobil had to come back to the table in order to obtain a production licence.
ExxonMobil and the defenders of the government have been trying to deflect these criticisms by arguing that as production increases, the country will earn more nominally.
So if you used to get one loaf of bread per week, you will now get three loaves per week. That still cannot pay a special hire from Georgetown to Plaisance.
It was therefore highly coincidental that the latest oil find was announced just as this issue was being debated in the media. In fact, Wednesday was a very eventful day for ExxonMobil.
On that day, too, the news broke of the continuing dip in the value of its shares. On the same day also, media reports indicated that ExxonMobil was pulling out of a joint venture with the Russian oil company Rosneft over fears of sanctions.
The pullout has cost ExxonMobil US$200M or more than ten times the signing bonus it paid to Guyana. Reports also indicate that the company was selling its 19% share in Terra Nova in Newfoundland.
It was another bad week for ExxonMobil. The company needed a boost. The announcement of the Pacora 1 find would therefore help ExxonMobil, which this week also outlined plans to increase production by 30% over the next seven years.
Guyana will be important to those plans. But Guyana is also entitled to benefit far more, since every time Exxon makes a discovery in Guyana’s waters, it boosts the value of Exxon’s assets and consequently its stock value.
Not many jobs will be created by Exxon.
They signaled this much very early. Local content still remains important to ensuring that Guyana benefits from its oil – and it is Guyana’s oil not Exxon’s oil. The experience of foreign oil multinationals operating in Africa is that they bring in expatriates for even the most menial jobs and they leave these countries poor when they depart.
Over the years, strong civil society groups, including environmental activists, have been responsible for bringing these oil multinationals to account.
As a result of this activism, many countries are now obtaining better deals than they would have in the past.
The non-governmental activists want their countries to have more than three loaves of bread with a dash of nut butter, as production increases. Guyana, however, seems excited by being provided with its loaf, nut butter or not.

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