Guyana may already be in the middle of an oil curse- Int’l lawyer

Jun 21, 2022 News

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By Davina Bagot

Kaieteur News – Citing the daily debts that continue to rack up as Guyana forges ahead with the production of its oil, coupled with the “astonishing” deal it accepted from the oil company- ExxonMobil- International Lawyer, Melinda Janki believes that the country may already be in the midst of the oil curse, called the Dutch Disease.

Janki gave this view recently while appearing as a panelist on a Moray House discussion on a review of oil, gas and the environment. She explained during her presentation that four years ago when she pronounced that oil would make Guyana poorer, rather than richer, the population was opposed to her comments. However, Janki said today, the reality could not be clearer as it is quite evident that the promised wealth from the oil and gas sector is yet to arrive. In fact, she pointed out, “Guyana is racking up debts that have to be paid to Exxon out of Guyana’s oil and so this vast wealth that we were promised will never arrive. We are seeing the environmental harm, Liz (the moderator) referred to the loss of livelihoods for the fishermen, the cost of living has gone up but not wages and we are now probably in the midst of the oil curse. A tiny elite is getting richer but the majority of people look to be getting poorer. The government is over spending, borrowing money (and) burdening future generations with debt…”
To top it off, the lawyer reasoned, “We have a contract that is inequitable, unjust and it is astonishing that any competent Minister could have signed such an agreement.” She pointed out that Jagdeo while in Opposition called the then government “incompetent” for gluing Guyana to such an agreement. She however noted that nothing has changed leaving Guyana with the same lopsided deal.
For instance, the Lawyer said that for every 100 barrels of oil that is pumped, ExxonMobil takes 75 for its cost recovery. She argued “with each new discovery of oil, with each new FPSO (Floating Production Sharing and Offloading vessel), with each new exploration, the costs go up and the time at which Guyana might see any real revenue is put off indefinitely.”
Recently, the Director of Financial Analysis for the Institute for Energy Economics and Financial Analysis (IEEFA), Tom Sanzillo shared that for every US dollar that Guyana earns per barrel of oil produced in the Stabroek Block, the Oil companies walk away with six dollars. Compounding the situation is the fact that at present, given the developments already undertaken and underway, each citizen of this country owes the oil company some US$44,000. Additionally, at the rate Esso Exploration and Production Guyana Limited (EEPGL)—ExxonMobil Guyana—has envisaged the developments, the ones already identified would see the country repaying ExxonMobil at least US$75B to develop which would mean that the country would be repaying debts on that amount until 2070.
It is in this regard that Janki also made reference to the government’s plan to ramp up oil production. She said too that this simply means that Guyana will be piled with additional burdens. The Lawyer explained, “the admission from the government that there is a rapidly closing window of opportunity and what we are looking at is massive debt, a shorter time period to make any money from oil and with every day that passes the growing risk that Guyana will be saddled with (such as) stranded assets and with the responsibility for shutting down the wells, now that’s not a very attractive future.”
She was keen to note that the wells are about two miles below the seabed, lying under immense pressure. As a consequence, the Attorney said this adds more expense to the country that is already collecting a small amount of revenue, when compared to the oil giants in the sector; however, government continues to shift these matters to be dealt with in the future.
The Dutch Disease or the resource curse describes an economic phenomenon where the rapid development of one sector of the economy (particularly natural resources) precipitates a decline in other sectors. Back in February, during the 2022 Budget Debates, former Minister of Public Security, Khemraj Ramjattan argued that the document is reflective of a country that is already heading down the path of the resource curse or the Dutch Disease, as is evidenced by the figures presented, confirming a heavy reliance on oil funds while at the same time the non-oil economy shrinks.
According to him, the figures as presented by the Finance Minister Dr. Ashni Singh, on January 26, last, reflect just how oil will become dominant, to the marginalisation minimization of the non-oil sectors. Lamenting the PPP/C’s administration’s lack of planning, Ramjattan drew reference to the last year’s spending, in which government would have returned to the National Assembly with Four Financial Papers for additional withdrawals from the Contingencies Fund, which he called bad planning. This, he said, is even more worrisome in this year’s Budget since, even with projected oil revenues and in excess of US$600M in the Bank, there is no mention of a plan for a livable minimum wage.

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