Govt says: Revenues from oil and gas still small

Nov 17, 2022 News

…but refuses to extract better terms from deal with Exxon

Kaieteur News – Finance Minister, Dr. Ashni Singh said the revenues being accrued from the oil and gas sector are still relatively modest, particularly considering the country’s developmental needs.

Speaking during the programme ‘The Narrative’, Minister Singh is quoted by the Department of Public Information (DPI) as saying that while the petroleum sector continues to grow and generate economic opportunities, the non-oil sectors must be developed to create a sustainable source of wealth. “We have seen many examples around the world of countries that were entirely dependent on oil, and if the oil price dips or if the oil production dips for one reason or another, the country finds itself in trouble. We don’t want to be in that situation.”

Finance Minister, Dr. Ashni Singh

“Government is focusing heavily on developing the transport infrastructure- roads, bridges, drainage, and improving connectivity, particularly in the hinterland. Major infrastructure projects being undertaken include the Mandela to Eccles Highway, East Coast to East Bank Demerara Road link, the Linden to Mabura road construction, and the New Demerara River Bridge, among others, ” Minister Singh said.

“Access to our neighbours like Brazil and Suriname is still a challenge. We don’t have a bridge across the river to Suriname, we don’t have an all-weather road to Brazil, and that, of course, you know, some of those infrastructural impediments still weigh very heavily on Guyana’s ability to realise its economic potential,” Dr. Singh further added.

Currently, Guyana has around 11 billion barrels of proven oil reserves and is producing about 350,000 barrels of oil per day. By the end of the decade, Guyana’s oil production capacity is expected to be more than one million barrels per day. The Minister said the commencement of oil production presents the opportunity to remove the historic impediments to Guyana’s competitiveness and sustainable growth in the long term.

“So, we are using this period to address precisely those impediments to ensure we lay the foundation for long-term growth and broad-based growth far beyond oil and gas. We want to make sure that every Region of Guyana has good connectivity and good roads so that they are not constrained by the impact of being isolated geographically from the capital city and major marketing centers,” Minister Singh explained.

Another area being addressed is electricity cost which historically, has been a major issue in Guyana and continues to be a constraint to the emergence of the manufacturing sector. In addition, emphasis is being placed on developing a competitive agriculture sector, as well as developing the health, education, housing and water, and social services sectors. In the immediate term, Minister Singh said the Government is concentrating on ensuring Guyanese can participate in the oil and gas sector, and in the transformation of the other sectors. “We want to make sure that everybody is ICT literate, that they’re able to participate in like I said, the modern economy, and we are already seeing returns to this. We already have in the oil and gas sector, literally thousands of persons drawn from across the country, drawn not only from Georgetown, not only from Linden, not only from Berbice but also Essequibo, working in oil and gas, directly in the oil and gas sector,” Singh expounded. The overall aim, the Minister said, is to leverage the country’s oil and gas resources to bring economic prosperity to all Guyanese.

Recently, Government announced that all future oil deals will secure more benefits for the country through a new Production Sharing Agreement. At a News Conference recently, Vice President Bharrat Jagdeo said the new PSA will include a 10 percent royally, 10 percent corporation tax and a ring-fencing provision. These will be applied to 14 oil blocks, which the Government intends to auction. Jagdeo said the blocks which vary in size but range from approximately 1000 square kilometres to 3000 square kilometres, with the majority of them being close to 2000 square kilometres. The Stabroek Block on the other hand covers approximately 26,800 square kilometres and is operated by ExxonMobil and its partners – Hess and CNOOC – remains bound to a separate arrangement in which it pays a mere two percent royalty, no taxes and also recovers expenses from multiple projects from the revenue earned by development, in the absence of ring-fencing provisions. Further, Exxon is allowed to deduct 75 percent of costs from Guyana’s earnings upfront to cover its expenses while the new PSA would cap cost recovery at 65 percent of earnings annually.

Transparency Activist, Dr. Yog Mahadeo finds the Government’s position disconcerting. In an invited comment to this newspaper recently, Dr. Mahadeo had said the Government must not be allowed to throw away the wealth in the Stabroek Block, in hopes that more oil would be discovered in the smaller oil blocks that are soon to be auctioned. “The current value of money is as real as it could be, compared to future value of money, and what we are doing, is throwing away current value and we are putting eggs in the basket for future value. In other words, we are pinning the hopes of a good PSA on future wealth or future contracts and not doing anything to maximise on what Guyana could get on the current one, so it is disconcerting,” Dr. Mahadeo said Monday.

He reminded that the PPP/C in its 2020 manifesto had promised to renegotiate the existing contract, rather than seek more on future deals. “They are trying to camouflage the current deal and we must not allow ourselves to be distracted from these current despicable conditions where Guyanese are paying the taxes for Exxon and all that goes with it”, Dr. Mahadeo said.