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Finance Minister opposed to Tullow Oil recovering 1% royalty
– says it’s tantamount to Guyana getting nothing at all
By Kiana Wilburg
Finance Minister, Winston Jordan is not in agreement with any arrangement that allows oil companies to recover the royalty they are supposed to pay the State. According to the Minister, it is tantamount to Guyana getting nothing at all.
The Minister made these and other comments during his first appearance on Kaieteur Radio’s programme called the Political Talk Show, which is aired every Wednesday.
There, Kaieteur News asked Minister Jordan if he is comfortable with Tullow Oil being able to recover a one percent royalty it would have to pay Guyana for oil found and produced from the Orinduik Block.
The economist said, “… The concept of the royalty is, for exploring my resource, I am getting something upfront. You are not supposed to recover that. So I could never be happy in a circumstance that allows them to recover the royalty.”
Jordan added, “It is virtually like you aren’t paying me anything. I would certainly advocate for this to be changed because I don’t see royalty being something that can be recovered.”
Finance Minister, Winston Jordan
University of Houston Instructor, Tom Mitro
Minister Jordan was reminded that the Orinduik Production Sharing Agreement (PSA), which allows royalty to be recovered, was signed by Minister of Natural Resources, Raphael Trotman. Pressed about why this provision was included in the PSA, Minister Trotman had told this news agency that he had received instructions from Cabinet on the matter.
But when questioned to say if he was present at Cabinet when such “instructions” were passed out, Minister Jordan said he could not confirm or deny.
“You know I am a travelling Minister and I can’t say that I recall being there or what was the question that was put to Cabinet. I don’t know if it was the one percent royalty. I can’t speak to what he says or the one percent and I can’t say if I was part of the discussion at that time because as I said I am a travelling Minister.”
WORSE THAN EXXON
In a previous interview with this newspaper, University of Houston Instructor, Tom Mitro had emphatically stated that the Tullow oil deal is worse than the Stabroek Block deal signed with ExxonMobil and its partners Hess Corporation and CNOOC/NEXEN.
He noted that the latter deal sees the nation receiving a mere two percent royalty and a 50 percent take of the profit oil while the Orinduik PSA offers a one percent royalty that can be recovered.
But Mitro noted that the Orinduik PSA is also worse because it has most of the troubling characteristics as the Exxon PSA namely: taxes paid out of the government’s profit oil, a cost recovery cap of 75% per year, abandonment costs allowed to be recovered in advance of actual spending the funds, interest on loans allowed to be cost recovered without any caps, and captive insurance company premiums allowed to be cost recovered.
The Petroleum Consultant with over 30 years experience in the field noted that the Orinduik PSA also has no ring fencing provisions which ensure that costs of unsuccessful wells are not carried over to those that are successful.
The University of Houston Instructor had said, “At this point, I would say the main lesson that might be learned is that taking adequate time to fully and critically review all aspects of any new Development Plan would be essential.”
He concluded, “That is the point at which the government typically has the most power to influence the ultimate results, not only the technical aspects but the costs, rates of production, the local content, contractor selection criteria, PSA interpretations, and other societal and environmental aspects.”
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