Oil blocks: VPs new game is designed to dodge from pressing Exxon

Nov 06, 2022 Letters

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Dear Editor,

I extend a warm word of congratulations to the VP and PPP Government on the results of the oil block(s) auction.  By my judgment both did very fair to well.  I will take it on behalf of Guyanese, though years away from any downstream bubbles to be felt.

In sum, 10% for royalty, 65% ceiling for expenses, 50/50 for sharing, and 10% taxes are a start.  I commend, then question.  Thus, I peek a little deeper of what could have been, should have been, with these auctions.  For starters, 2% was out the window, and so was 4%; even 6%.  Too little, not too inspiring.  These foreign bidders either want Guyana’s known high quality crude, or they don’t.  I will settle for 10% as a heartening number, a baseline only.  After all, 26,000 kilometers in Stabroek represent a continent, gives Guyana much room to manoeuvre on other occasions.  They will come and bid again, and it has to be more than 10% royalty, whether they won, lost, or drew in terms of production and profit.  Regarding that invitation for locals to bid, I foresee that falling into the hands of the less-than-1%-people in Guyana.  Capital, connections, and the camaraderie of the corrupt.

Next, the 50:50 profit sharing is sober, fair, and balanced.  To paraphrase the Most Honourable Vice President, the returns to the investors (all closest to his kind heart) must match their risks.  I agree, but that is not my business, and in the scheme of Guyanese considerations, investors; risks and returns are secondary.  They know that better than a million Guyanese VPs put together.  Just like royalty rates that work for them, that also is a ‘no brainer’, as Guyana’s wise VP once asserted.

Now, I part company with the Hon Vice President, a leader I prefer to stay far from, since it is not uplifting to my values and standards.  I have a problem with that 65% cost ceiling; 65% is still too high, and presents countless opportunities for foreigners to emulate Exxon’s accounting and gouge us.  I would settle for 50% cost ceiling as drop-dead figure, with that laudable ring-fencing provision attached.  It was this: take it, or leave our oil alone.  Do I hear another bidder? Step up, please!

Then, I have a bigger problem with that business about taxes.  Surely, Mr. Vice President (Dr.), 10% taxes is a lowdown, dirty trick to play on the Guyanese people.  Why, Guyanese are paying more than three times that paltry figure.  Sure, sure, I hear the PPP punditocracy pontification that it is 1000% better than no taxes at all, thanks to the weak, woeful PNC.  It should have been 20%, and that had to be that, with no discussion; everyone gets something.  This is our oil, and we call the shots.  Those would have been my starting figures, just like they do at Sotheby’s, and who didn’t like it could leave.

As an aside, I favour 20% windfall tax on Exxon’s profit differential between 2016 prices and that of today.  I think that the result would be some sweet American millions for Guyana.  Looks like the VP prefers to distract Guyanese with his new PSA terms, which will not come to fruition for years, at least three, maybe five.  Too many Guyanese would still be languishing in poverty in 2023-2025 and later.  The VP dangles enticing fairy lights, while Exxon controls the power plant (Stabroek Block projects) which leaves alone, is untouchable.  No money now.

Taking the whole package together, the PPP Government and the VP both know that the Americans and Europeans are not going anywhere (not with the Saudis and OPEC+ gaining the ascendancy), so this is our turn to play hardball.  And since the Yanks must stay put, then Venezuela stays on its side of the border, with gunboats securely fastened.  Thus, we convert our insurance card (2% and zero taxes) to our negotiation card.  Correction: renegotiation, and it would be pursuant to our calculations.  Does Exxon really desire to go to court?  Is America going to sanction Guyana?

Finally, I heard that payback possesses savaging hornet’s stings.  What ExxonMobil did to us, and how it twisted the screws, stands as our first and only negotiation lesson, our pivot.  This is Guyana’s time.  Put differently, what Peter did to Paul, now all Paul(s) must pay to Guyana.  What Exxon did to us, we do to the rest.  I don’t need Patrice Lumumba or Oxford to teach me these hard facts of life.  It is pay to get in, or get out of Guyana’s face.  I think the VP’s new PSA is flattering.  It also is deceiving.  Still, a decent outing overall, a gradualist, incremental approach, I perceive, plus the usual dodges.

Sincerely,

GHK Lall

 

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