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Guyana would be lucky if it gets anything around US$60M for next three oil lifts – Finance Minister
As a result of the novel coronavirus, oil prices have been collapsing at an alarming rate. In fact, the price of oil has been below US$20 for the past few days. When one considers this predicament, Finance Minister Winston Jordan said he does not anticipate Guyana getting anything close to US$30M for the next one million barrels of oil it will lift from the Liza Phase One Project in the Stabroek Block.
Finance Minister Winston Jordan
This would be significantly lower than the first sale Guyana made in mid-February. In that sale that was executed with Shell Western Supply and Trading Limited (SWSTL) which is based in Barbados, the local authorities were able to lock in US$55M. Guyana has four million barrels of oil left to collect for 2020. The second lift of one million barrels is due next month.
According to the Minister, Guyana would be lucky if it gets anything around US$20M for that sale.
During an interview with the Department of Public Information, the economist said, “…In all, it is five shipments but the last one, the payment for it would not come in until the next year.” Focusing his attention on the three sales for which payment would be received this year, the Finance Minister said Guyana is looking at raking in approximately US$60M. When added to the first sale, this brings the total to US$115M.
The Minister said that if the government was able to access half of that for the COVID-19 fight, it would certainly go a far way in assisting small businesses in particular and the vulnerable in society, such as those who lost income as a result of the lockdown. He was keen to note that while those funds would have helped greatly at a time when the nation’s resources are “slender”, the “political pandemic” that is in play restricts access to the oil revenue that is safely tucked away in the Natural Resource Fund.
In the meantime, the Minister said that requests have been made for funding from several international financial agencies. He said, however, that access to that kind of international assistance is still not automatic or disbursed immediately, as there are several hoops to jump through. As a result of this, Jordan said that the government would have to be dependent a lot on the generation of domestic resources and how efficiently those can be used.
Like Minister Jordan, the Inter-American Development Bank (IDB) has said that it is highly unlikely that the government will be able to rake in huge oil-related profits, especially the kind that was projected before the market was plunged into economic turmoil by the coronavirus.
Considering current market conditions, the bank anticipates that the government will experience a 40 to 60 percent decline in the estimated value of its oil exports.
In one of its most recent reports, the financial institution specifically said, “The government is expected to make four more sales in 2020, potentially at much lower prices. Under oil price scenarios varying between US$20/barrel and US$35/barrel, the estimated value of oil exports (US$2.4billion ) could decline by 40% – 60%, leading to terms–of–trade effects affecting the GDP growth estimate.” Such a decline is equivalent to a loss of US$1.4B or $280B. To understand the significance of this loss, one only needs to remember that Guyana’s 2019 budget was US$1.5B.
Further to this, the bank said that Guyana’s expected oil–related revenues, some US$230 million, could decline by 15 percent to 40 percent, which would be the main impact on Guyana from the oil price fallout between Russia and Saudi.
It should be noted that it was the International Monetary Fund (IMF) that originally estimated that Guyana’s oil production would contribute to achieving oil exports worth US$2.4 billion, oil – related government revenue of approximately US$230 million, and a GDP growth rate of 86% on an assumed price of oil of US$ 64/barrel. As the IDB noted, these will be affected in light of the coronavirus and the effects from the oil price war.
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