Guyana is becoming the ATM of the Caribbean

Feb 20, 2023 Features / Columnists, Peeping Tom

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Kaieteur News –  Guyana is going to end up spending close to US$2B in order to generate an additional 300 MW of electricity. This sum will be needed to bring the gas to shore and then to build an electricity-generating plant.

This is not a feasible investment. It is estimated that it costs US$1M per every I MW of solar power. As such, it will cost a mere US$300M to generate the same 300 MW which the gas to shore plant will generate.  This is one of the reasons why there have been calls for a feasibility study that is specific to this gas-to-shore project. The studies which have been done have merely examined the feasibility of bringing gas to shore. But what is needed is a study of this specific project which is being undertaken by the government. The study should involve looking at all options, including whether it will not be cheaper to graduate to solar and hydrogen rather than using natural gas which is not renewable.

Half of the estimated cost of the gas-to-shore project is going to form part of Exxons cost recovery. The oil company is bringing the gas to shore and will be paid in oil for its US$1 B investment. But at least the government should make public the details of this estimated US$1B dollars since it has to be repaid from oil proceeds. Exxon cannot be trusted at face value. The company is building a headquarters which is estimated at US$160M, a staggering cost. This will be the most expensive office buildings in the Caribbean.

The Skeldon Sugar Factory is believed to have cost US$187M, just shy of the cost of Exxon s headquarters. The new headquarters will cost about twice what the government spent on the Marriot Hotel and more than four times the cost of the National Stadium at Providence. The government needs to question this expenditure on two counts. First, they need to question the need for such a costly headquarters.  If this accommodation forms part of the oil company s operations, then should it not be subject to local content requirements? In other words, should Exxon not be required to rent local facilities rather than build its own headquarters?

Secondly, the government needs to question details of this high cost. This is a stinking amount of money to be spent. It is one of the issues which have arisen in relation to the Production Sharing Agreement, in which they are no restraints on the oil companies  spending. What happens if the oil company decides it wants to build its own airport and hotels for its workers? Will this too be allowed as cost recovery?

While all of this is happening, we are told that Guyana is now in a better position to borrow more. And the PPP/C loves to beg and borrow.  And the country has been borrowing, despite having hundreds of millions parked in the oil account at the Federal Reserve in United States.

Guyana has to be very careful with its borrowing. If it accumulates too much debt and if oil prices collapse, as they will sometime or the other, the country could be saddled with massive debt. What will happen then? One Caribbean Prime Minister once said that her country should not be looked at as the ATM of the Caribbean. It appears as if Guyana is being viewed as the ATM of the Caribbean and we are behaving as if we are the ATM of the Caribbean. The government is yet to tell Guyanese just what contributions it is required to make as a condition of its membership of the Regional Security System. As this column had predicted, Guyana is now being asked to examine its role in the revival of LIAT. This is another way of saying that Guyana is being asked to consider bailing out the financially-strapped airline.

A country which does not have a national airline is being asked to support the bankrupted regional carrier. It was just announced that Guyana will contribute US$1M to some food security fund in the Caribbean. What is Guyana getting in return? Has any non-tariff barrier been dismantled in the Caribbean? There was much ado about plans to have such trade-restricting barriers removed by last year. But still there are complaints about honey being prevented from even passing in-transit through Trinidad and Tobago. Guyana has to set itself in order. It has to determine whether cost recovery is applicable for Exxon s proposed headquarters; it has to urge Exxon to either scale down the project or abandon it all together; and it has to stop behaving as if it is the ATM of the Caribbean.

 

 

 

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• ATM, Caribbean, Exxon’s, Peeping, solar power, Tom

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