I wholeheartedly agree with the IMF’s recommendation

Oct 31, 2018 Letters

DEAR EDITOR,
This is in reference to Darshanand Khusial’s October 29 letter in the press titled “Global Contracts are being renegotiated on Fairness, Why can’t Guyana do the same.” In it, he attempts to refute my points on his earlier letter regarding Guyana’s oil contract.
Mr Khusial questions my access to Rystad Energy’s work on Guyana. I understand he is new to the oil discussion, so to be clear: the Rystad Energy information is public and was presented publicly in Georgetown earlier this year. It was also shared in a recent presentation at an American think tank called the American Security Project that can be found online.
Since Mr Khusial has clearly not looked at this information, I understand his confusion on the difference between projections from Rystad and ExxonMobil. They are not the same – Rystad’s report is an expert analysis based on certain estimates and assumptions. Chief among these is the projection that all our known reserves will be produced and sold. On the other hand, production estimates released by ExxonMobil are only for the oil to be developed in Liza Phase 1.
Due to the rules of the U.S. stock market, Exxon must be more restrained in its projections about future oil production. Obviously, the information coming from the two will be different.
Being able to interpret the differences in the existing data is key, because there are so few studies out there. While Rystad’s data is useful, it is one of only a few studies on Guyana’s energy by independent analysts. I ask Mr Khusial, what other information should I use? Does he trust data from the industry more? Perhaps I should make numbers up out of thin air?
Mr Khusial also seems to think that the IMF report is a better alternative. Unfortunately, the IMF report did not provide the projections relevant to our discussion. However, I must point out that he is intentionally misreading that report as well.
The IMF report, paid for by the Government of Guyana, explicitly said that we should not attempt to renegotiate the current contract. In the introduction, it clearly states that “the immediate priority should be to strengthen the capacity to effectively implement the contractually agreed fiscal regimes. For new investments, focus should be on improving the general fiscal regime and any future contracts reflecting the now lower exploration risk.”
Trying to change a contract that we have already signed could prevent continued investment in Guyana. It would delay the revenues our government and people will receive. It could have disastrous consequences for local companies that are currently trying to become involved in the oil industry.
Instead, the IMF recommends that we adapt our future contracts with oil companies. I wholeheartedly agree with this recommendation. Now that we know more about the extent of our reserves, we have leverage to get more from production of our national resources.
Sincerely,
Clement Smith

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