ERA of windfall oil profits is here: A compelling reason to demand renegotiation

Jul 30, 2022 Letters

Dear Editor

This is a front page story today in NYT: Exxon and Chevron Report Record Profits on High Oil and Gas Prices; The energy industry’s windfall has followed a spike in prices, resulting mostly from Russia’s invasion of Ukraine, and a global economy rebounding from the coronavirus pandemic.

I could never fathom Mr. Jagdeo. Who says he is the smartest politician in Guyana? Here we have a contract signed in 2016 under funny circumstances. I mean it was not negotiated, not read – but signed. Minister Trotman said somebody very powerful (never provided name) “instructed him to sign”. That must be a powerful person – but he himself never read the contract. So, what is the basis for him to instruct Trotman to sign?

Mr. Jagdeo ascended to power in 2020. And, although he condemned the contract in the run-up to the elections, he now not only embraces the contract, but also vigorously defends it. Somebody could easily advise him to “stan quiet”. That’s more honourable. Be quiet, lest you be seen as a VP of Exxon, or worse, a Sellout.

Alright Ukraine War, world conditions change. Oil Prices are now averaging $100 a barrel. (When it was signed it was $65). Isn’t this a good enough reason to approach Darren Woods – and ask him to agree to a sit down meeting and talk about how to make this contract a little more equitable for the Guyanese people.

WHAT IS SO UNREASONABLE about asking him to share the windfall portion ($100 – $65) with the Guyanese people? After all, Guyana is the owner of the resource. We just hire them to drill for the oil. Unfortunately Trotman did not read – and signed a lopsided contract. Does this mean we are stuck?

The contract does say it can be renegotiated, providing both parties agree to do so. It is Mr Jagdeo who strangely embraces the idea that the Contract cannot be renegotiated. A head-of-State is duty-bound to articulate reasons for renegotiation. Not reasons not to renegotiate. A head-of-State has a responsibility to get the best price – Fair Value – for our natural resource. Not to abdicate responsibility by claiming it was signed by previous govt – and to say to the nation “I am helpless”. That position is scandalous – A Sellout !!

Mr. Jagdeo and delegation are in the capital of the United States this past week – meeting Secretary Anthony Blinken and Congressmen. Did he bring up this lopsided oil contract – and ask for support to help Guyana renegotiate a Fair Contract? Not a word about this matter. Such a lost opportunity !!

Editor, permit me to repeat here: On 11 BB times 4.25% times $65 = $30 billion. If the calculation is done on the new average price of $90 a barrel, it comes out to $42 billion. This is what Guyana is losing/foregoing when Guyana’s royalty rate (2%) is compared to Suriname’s 6.25%. Guyana cannot afford to lose so much money.

Whatever happened to the principle of decency and Fair Value?

There are several other egregious items in the contract that need to be renegotiated. Oil companies pay no profits tax but they collect tax receipts. This is a blatant fraud that got embedded in the contract. Mr Jagdeo is defending that too. It is time President Irfaan Ali takes charge of his Administration – and summons the courage to demand renegotiation of a very lopsided oil contract. Frankly, it is unbearable for Guyana to be stuck with this contract for the life of this contract – about 30-years

Regards

Mike Persaud

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ERA of windfall oil profits is here: A compelling reason to demand renegotiation

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