1% royalty subject to cost recovery equals zero

Aug 20, 2019 Features / Columnists, Peeping Tom

I don’t want to hear about any more oil discoveries. The more oil discoveries we have, the more we are being robbed.
Guyana is being recolonised by the oil companies. The agreements which have been signed with these oil companies represent the worst deals possible. Guyana’s petroleum resources are being given away for rock-bottom returns.
It was hard to imagine that after the 2% royalties signed between Exxon Mobil and the Government of Guyana in 2016, that things could have gotten worse. Little did Guyanese know that another oil company would get a far better deal than Exxon Mobil, and at Guyana’s expense.
This newspaper reported this past week that Tullow, a British oil company, got a deal which would allow it to pay only 1% royalty. And to add insult to injury, this 1% is recoverable. Where in the world has any government given 1% royalty and then subjected it to cost recovery, meaning it is possible to reclaim it.
1% royalty represents the newest low. It is as if the oil companies are giving you with the right hand and taking back with the left. Is this the better which was promised by APNU+AFC after the bubble had been burst on the Exxon deal?
Royalties are supposed to be free of costs. This means that nothing is supposed to be deducted from royalties. However, we are being told that the 1% royalty negotiated can be reclaimed as costs by the oil companies. If true, this effectively means that there is no royalty.
It is not clear, also, whether there is any signing bonus. The government secured a US$18M signing bonus from Exxon and hid this fact for many months before it was exposed.
Guyana is being taken to the ‘cleaners’ by these oil companies. There is no need for a commission of inquiry or an investigation to confirm this. The worst deals ever have been signed by the APNU+AFC government. And these deals raise the possibility of Guyana being an oil-producing country, but still being poor.
Guyana now has something far worse to worry about than the Dutch disease or the resource curse. The oil deals which are being signed are far worse than these curses which oil-producing countries have been forewarned to avoid. It would have been much better if Guyana contracted these oil illnesses than to have signed agreements which represent fiscal murder.
What is disconcerting is the lack of public outrage over these agreements. The politicians are strangely silent on these issues. They are not saying anything. They have treated these oil companies as benevolent investors.
The modus operandi of these companies, however, suggests that governments are at risk of being exploited by these oil companies. They have superior negotiating knowledge and they are very proficient at getting the better of governments.
The people of Guyana should kiss oil riches goodbye. By the time the dust settles on these oil deals, the political mist would have already clouded their judgment or suppressed their conscience. The obvious would be denied.
No manner of excuses, however, will change the reality that Guyana has gotten the rotten end of the stick for two of its major oil blocks. The agreements signed are likely to be used a precedent by other oil companies. It means that new companies will demand no less favourable terms. And the result of this is that Guyana will be raped of its oil wealth, right in front of our eyes.
The President has to call an emergency meeting of his Cabinet and demand an explanation. No President should accept such a deal. It stinks to the high heavens. It is rip-off of Guyana, and means that the more oil we get, the worse off we will be.
If he does not, then Guyanese should demand that there be no oil production until all of these deals are renegotiated.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper)

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