Bread and egg ball

Aug 24, 2019 Features / Columnists, Peeping Tom

The coming election is not about the future. It is about going backwards to the past: the past when multinational corporations such as Bookers, Reynolds and Alcan took control over Guyana’s natural resources, sugar and bauxite, and creamed off the wealth of the country.
Guyanese can today substitute the names of Bookers, Reynolds and Alcan for Exxon, Hess and Tullow. All three are oil exploration companies and all three have signed contracts with the government. These agreements represent the worst ever signed in the history of oil negotiations anywhere.
It is to the utter discredit of the APNU+AFC Government that these deals could have been signed under their tenure, especially when one considers that the Coalition was highly critical of the Marriott Hotel deal signed by the PPPC.
The PNCR and the AFC were highly critical of the Marriott Hotel deal. They even picketed the hotel. They protested strongly against the financial structure of the hotel. Yet, the APNU+AFC Government, in office for more than four years, is yet to disband, sell-off or restructure the financing of the hotel. In fact, it has been showcasing it by the hosting of numerous events. The PPPC has indeed had the last laugh.
The oil deals of 2016, entered into by the APNU+AFC Government, are however no laughing matter. This newspaper has reported that the deal with Tullow for the Orinduik Block was far worse than that which was signed between the government and ExxonMobil.
The government has not denied a report, which stated that the company is required to pay 1% royalty, which amazingly is subject to cost recovery.
The 2% royalty negotiated with Exxon was bad enough. So what words will be used to describe the 1% royalty subject to cost recovery. This is no laughing matter because Guyanese expect to be able to benefit when oil production begins.
Exxon expects to do so next year with an estimated production of 120,000 barrels per day. At US$55 per barrel and 300 working days per year, the 2% royalty should yield about US$40M per year.
You think that is money? That is chicken feed. A bankrupted GuySuCo earned more than that in foreign exchange in 2017.
Now if the US$40M is divided by the 750,000 persons in the country it gives US$53 per person or about $12,000 per year per person which amounts to about a G$1,000 per month. That cannot buy four loaves of bread per month. With Tullow, Guyanese will each get about $500 per month from the royalty, on the assumption that the production on start-up is the same as Exxon. If it is lower, Guyanese may have to settle for an egg-ball per month.
I would therefore advise Guyanese to put in their advance orders for three loaves of bread and a bun each month from Bakewell or Quality, or whichever bakery they buy bread from, because that is all you are going to be able to purchase because of these rotten deals which were signed by the APNU+AFC Government.
People will ask, “Well what about the 50/50 production sharing?” Well what about it?
With cost recovery capped at 75%, carry over costs to the next month and the lack of ring-fencing, nothing much is going to be left. Whatever is left from the profit oil from one well is going to be absorbed by cost recovery for unproductive wells. And let us not forget that Guyana already owes a huge bill for the exploration works which were taking place prior to the discovery of oil.
The debate, therefore, about what Guyana is going to do with its oil riches should be laid to rest. There is not going to be much to distribute. This is why the government is not being drawn into that proposal by the WPA for cash grants to families. Where is the money going to come from to finance cash grants?
The money has gone! And it has not gone to Cove and John. It has gone back legally into the coffers of the multinationals in the oil industry operating in Guyana.
When Guyana nationalised the bauxite industries, it ended up paying compensation to the multinationals, which for years we were told had been exploiting the Guyanese people. The compensation posed such a burden on the economy that it created a debt crisis and enormous hardships fifteen years after nationalisation. The multinationals in the sugar and bauxite industry had their cake and ate it too.
Guyana has no cake to get from the oil industry. Guyana will get bread and egg ball.

(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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Bread and egg ball

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