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“Royalty lumped with profit oil not unusual” …Minister Trotman says it’s in Guyana’s best interest
Minister of Natural Resources, Raphael Trotman
In most Production Sharing Agreements (PSAs), governments negotiate with oil operators for fiscal terms that are fair, favourable, and in keeping with international best practices.
In fact, one of the fiscal terms a country would ask for is royalty. This money comes out first from the oil profits. No matter the economic circumstances, this tax remains unchanged and it must be paid by the contractor. This tax would be in addition to the terms agreed upon by the contractor and government as it relates to sharing or splitting the remaining profit oil.
But Guyana’s PSAs with at least four oil operators show a different arrangement for royalty. According to the oil deals with Tullow Oil and Eco Atlantic, Ratio Oil and CGX, Guyana is getting a one percent royalty that is being lumped with its share of the profit oil.
Some commentators, who Kaieteur News consulted, explained that not only is this “bizarre” but also “criminal, since “lumping it with the 50 or 60 percent share of the profit oil that belongs to the country is essentially robbing it of the royalty it deserves”.
Minister of Natural Resources Raphael Trotman was questioned about this peculiar arrangement yesterday. The politician said that he does not find anything unusual about it.
“No, as I said, there are different models of PSAs, and so there is no norm. Things have changed, but each country determines what is in its best interest, so I wouldn’t accept the word bizarre.”
Asked if he believes that such an arrangement would be in the nation’s best interest, Trotman responded, “It was in our best interest to attract investors to Guyana, yes. The previous administration did it and this administration is bringing investors as well.”
While Trotman holds the aforementioned view, there are hundreds of other contracts signed by the Governments of nations, which do not bear such an arrangement.
Nations such as Chad, Papua New Guinea, Indonesia, and Uganda all ensure that royalty is paid separately; off the top and not lumped with its share of the profit oil, be it 60 or 50 percent.
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