Local content is not a substitute for a fair deal

Sep 18, 2020 News

– Dr. Jan Mangal

By Kemol King

Petroleum consultant, Dr. Jan Mangal, is of the view that while local content is important and necessary, the Irfaan Ali administration cannot expect it to be a substitute for a fair Stabroek block deal with ExxonMobil. Mangal said that the money locals will get from local content is peanuts compared to the US$55B the country can get back if it renegotiates the controversial production sharing agreement (PSA).
The former Presidential Advisor on petroleum appeared on last Tuesday’s edition of Kaieteur Radio’s Petroleum 101 during which he discussed issues of governance in Guyana’s petroleum sector.
When it comes to governance, Dr. Mangal is yet to be convinced that the People’s Progressive Party Civic (PPP/C) government is demonstrating prudence.
Vice President, Bharrat Jagdeo, has repeatedly refused calls for the renegotiation of the deal, widely condemned as lopsided and unfair by local and international commentators.
It was Global Witness that put out a scathing report, which noted that Guyana is set to lose about US$55B over the life of the agreement due to its value-leaking provisions.
Dr. Jagdeo agrees that the deal is bad, but insists that there are other ways to claw back value. He has touted local content as one of these.
Mangal said that local content is a red herring for the government’s refusal to get a better deal.
“Countries don’t make their money from local content.”
He said: “If that was the case, we should just give away all the oil; say “Exxon, we don’t need royalty… [or profit share]… We’ll take zero percent.””
“But countries don’t do that because the value for a country is in the production sharing contract, is in the royalty, is in the production sharing, and is in tax. That’s where countries make billions and billions, and that’s where we’re losing US$55B.”
In this regard, Guyana’s royalty is a paltry two percent that is all the way at the lower end of the spectrum of royalties examined by Kaieteur News for a series of oil producing countries. As for taxes, ExxonMobil and its partners are paying none.
What is the result of such an agreement? Guyana is set to get 14.5 percent of the revenue from the sale of its crude, while its neighbour to the east, Suriname is set to rake in nearly three times that share, 36 percent.
Mangal said that the reason the PPP/C is pushing for local content is that local businessmen, who are largely supporters of the party, will “make a killing” when this issue is championed, even if Guyana gets peanuts from the oil deal.
In its six weeks of being in government, the administration has already appointed an advisory panel on local content which has gotten mixed reviews from Dr. Mangal.
One appointee, Trinidadian local content expert, Anthony Paul, had worked on earlier drafts of Guyana’s local content policy, before the former David Granger administration replaced him with an ExxonMobil affiliate, Dr. Michael Warner.
Mangal commended Paul’s reappointment as the only good placement on the panel.
“He is an actual expert in that,” Mangal said. “He goes around the world. He is well respected by governments.”
However, Mangal had less kind words for former Foreign Affairs Minister, Carl Greenidge, whom Mangal had fiercely criticised for positions he took on the Stabroek block deal under the former government’s tenure.
Dr. Jan Mangal noted concerns that Greenidge may be a mouthpiece for ExxonMobil.
He suspects the former Minister was placed on the advisory panel to rein in Paul, who has demonstrated his ability to ensure maximum local participation in the sector.
As for Kevin Ramnarine’s appointment, Mangal said: “He doesn’t add any value. He has been knocking around Guyana for years looking to get involved.”
Mangal said that the former Energy Minister of Trinidad & Tobago has no demonstrated track record in local content, nor could he boast the same respect as Paul, in this regard.

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