Exxon controls all the cards

Feb 09, 2019 Features / Columnists, Peeping Tom

Forty years ago, Guyana was in the doldrums. People had to line up, first for bread, then for food, and then for basic commodities.
Forty years ago, Trinidad and Venezuela were flush with oil wealth. Guyanese running from economic hardships began to migrate to those countries.
The tables have turned. Trinidadians are now flocking to Guyana. And Venezuelans are crossing our borders to escape their country’s problems.
Venezuela is now reeling from a severe economic contraction and is fast approaching reaching where Guyana was in the 1980’s. Trinidad’s economy is also experiencing problems. Trinidad’s oil production is around 66,000 barrels per day of crude oil, way below the 200,000 it was producing in 1980.
Next year, Guyana is expected to kick-start its oil production with 120,000 barrels per day, conservatively reaching as high as 750,000 barrels by 2025. The initial production from the Liza-1 project is expected to be double the present levels of crude oil production in Trinidad and Tobago.
Oil production is expected to leapfrog Guyana’s economic growth and allow it within the next 10 years to close the gap in per capita incomes between Guyana and Trinidad and Tobago. Guyana’s per capita gross domestic product (GDP) stands at US$4,735; Trinidad’s is over US$16,000.
For a long time, it did not seem possible that Guyana could ever close that gap. But things have changed. With oil production expected to vault economic growth, the per capita GDP of Guyana is anticipated to surpass that of Trinidad and Tobago within the next ten years.
Against this background, it was shocking to read a report in yesterday’s edition of the Kaieteur News, in which a senior official of Exxon Mobil was reported as saying that Guyana’s problem is that it is aspiring tomorrow to be where Trinidad is today. He was reported as noting that Trinidad took decades to reach where it reached.
If the oil production in Guyana reaches the levels projected by Exxon over the next ten years, there is no reason why Guyana cannot close the development gap between itself and Trinidad and Tobago.
The question to be asked, therefore, is why this seeming attempt to moderate expectations of the oil boon in Guyana. The former United States Ambassador to Guyana has said that Guyana’s GDP can increase by 1,000 percent by 2025, accounting for more than 300 years of growth.
With this assessment by the former US Ambassador, one has to ask why there is now an attempt to put a damper on Guyana’s prospects. Why is reference being made that Trinidad and Tobago took decades to reach the level of development it now enjoys?
If Guyana’s GDP expands by more than 1000 percent by 2025, as the former Ambassador said it will, what is to prevent Guyana surpassing Trinidad and Tobago in per capita GDP within one decade.
Trinidad and Tobago’s oil industry is on the downward slide. The country plans to increases investment in order for a turnaround this year. Even though its production is now at rock-bottom levels, it is renegotiating its oil contracts.
Guyana is refusing to do the same. It shortchanged itself during its negotiations with Exxon Mobil. When the APNU+AFC signed the production sharing agreement with Exxon Mobil and partners, there were only about four wells, which were discovered to have oil.
Exxon, in return for production rights, paid Guyana an insulting US$18M as a signing bonus. One economic analyst said that the sum should have been around US$350M. Since then, more wells have been discovered, but no additions are being made to the signing bonus, which by now should have reached more than US$1B.
Guyana could have saved the Trinidad oil company by agreeing to sell its share of production to that company. It did not. So who is going to buy Guyana’s share of profit oil? The answer is not hard to guess.
No wonder Guyanese are being urged not to have high expectations. Exxon controls all the cards in the local oil economy. And the Trinidadians who have experience in the oil industry will come and absorb all the local content, because the Caribbean Single Market and Economy will allow Trinidadian companies to be treated as local companies, insofar as local content is concerned.

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