Jagdeo is waiting to welcome a ship that has already sailed

Feb 16, 2021 Features / Columnists, Peeping Tom

Kaieteur News – Jagdeo’s logic is twisted. Instead of making an argument that oil revenues will never be sufficient to allow Guyanese to not have to work, he should be asking himself why this is so.
He however skilfully tries to dodge this question. It was the PPP/C and the APNU+AFC which are responsible for Guyana obtaining the worst oil deal in the history of oil deals. Had Guyana obtained a fair deal for its hydrocarbon resources, every Guyanese would have had the choice of deciding whether they would want to work or not work.
Jagdeo dismisses this possibility. In doing so, he overlooks the fact that Guyana is listed among the world’s top 20 countries with proven oil reserves. Given its small population, it has to be among the leading countries when it comes to barrels of oil per person. This alone is an indicator of what could have been, had the country gotten a fair oil deal.
The country did not even secure a proper signing bonus. Imagine Exxon is going to give the country a charitable handout over the next 10 years, which is more than five times the size of the signing bonus. This alone shows how badly our leaders negotiated the agreement and how much the government, which Jagdeo now serves failed to obtain a better deal.
Payara was supposed to be the litmus test for Jagdeo and the PPP/C. But they failed this test. They squandered an opportunity to obtain the resources, which would have allowed every Guyanese to luxuriate.
Jagdeo is being disingenuous when he uses the revenues from what he calls the fledgling oil industry to make out his case that Guyanese will always have to work. Guyana was to have earned US$300M in its first year of oil production. It earned a mere US$200M.
But the revenue stream will increase from 2025 onwards. Jagdeo knows this fully well because he has admitted in the past that the big petro-dollars will not flow until then.
It is projected that Guyana’s take from oil in 2025 will be more than US$3B. Now if you divide that by what Jagdeo says is 400,000 households, it means every household should be entitled to US$7,500 or around G$1.6 M.
But Jagdeo’s estimate of 400,000 households is a gross exaggeration. The 2012 census found only 210,000 households. The explanation as to how this can almost double in a decade without a corresponding increase in the population is to be found in Jagdeo’s head. If the 210,000 households are used, it would mean that each household would be entitled to $3M per annum per household, based on the projected 2025 oil earnings.
The World Bank estimates that the average annual earnings for Guyana will be around US$2.1B per year. And this is only for exploiting 20 percent of the total gross recoverable reserves. This estimate was done before some of the latest findings by the oil companies. More importantly, it assumes the lop-sided terms – two percent royalty and 50 percent profit oil – which were negotiated by the APNU+AFC and which the PPP/C has so far declined to renegotiate. Guyana’s total take will be 14.5 percent.
The point, which Glenn Lall has been making is that had Guyana gotten better terms – say 10 percent royalties along with corporation taxes – the net revenues earned by the country would have been far greater.
But Jagdeo is not going to admit that because his government has failed to renegotiate the oil agreement to ensure a better deal. Instead, he now wants the public to accept that the government is pressing for better terms including local content.
Local content cannot be considered an additional benefit to be negotiated. Local content should come with any oil agreement. This is not an additional benefit.
Jagdeo says he is being told that over the past couple of months many of the foreign companies are now hurrying to hire local personnel. He is basing his assessment on hearsay rather than an empirical measurement of the actual increase in employment. That is how the oil sector is being managed, on the basis of hearsay.
The fact of the matter is that the local content ship has already sailed. Irfaan and Bharrat, however, are on the shore base with outstretched arms waiting to welcome a ship, which is leaving rather than entering the port.
Exxon has long said that the amount of direct employment on the rig for Guyanese would be limited. And the Americans and Trinidadians and other companies have long captured the supply chain market for the local oil industry
But more importantly, no new law or policy can disadvantage Exxon. The government can pass whatever local content law it wants, Exxon is above those laws or policies, according to its agreement. If Jagdeo did not know that, then he now knows.

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