First quarter oil report

Apr 28, 2023 Letters

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Dear Editor,

I refer to your article captioned, ‘Guyana earns US$219M in royalties, profit oil in first three months for 2023’ (KN, April 20, 2023) in which it is stated that Guyana received US$161.86 million as profit oil and US$57.59 million as royalty. This information was released by the Bank of Guyana (BoG).

Editor, while I would like to applaud the BoG for the release of a small part of the financial data, this information about earnings is less than what was published by the BoG in the recent past. More specifically, without the publication of the total number of barrels of oil sold and total revenue earned, together with the fact that there is a low probability that the full EEPGL audited reports will be made public (see Article 9, pages 22 to 24 of the PSA), this information release by the BoG is no better than a publicity stunt that obviates any standard associated with complete transparency.

Nevertheless, and because of this lack of financial data, I decided to use the royalty information to derive what is the estimated total value of the oil sales in the first quarter, and to estimate EEPGL share of total revenue.  In this regard, and in keeping with Article 15.6 page 39 of the Production Sharing Agreement (PSA), where it is stated that ‘the Contractor shall pay…’the Government… a royalty of two percent (2%) of all Petroleum produced and sold…’ I calculated that the total revenue is US$2,879.5 million (this is, US$57.59 million divided by 0.02).

Verification of this total revenue amount and the number of barrels of oil sold, will have implications for the share of the total revenue that Guyana and EEPGL receive.  In fact, if the total sales amount of U$2,879.5 million is correct and Guyana share is US$219 million, then EEPGL share is US$2,660.5 million, which Guyana can accept or Guyana can raise an objection. However, an objection can be a very expensive undertaking, as all disputes have to comply with Article 26 (pages 59 to 61) of the PSA which require a hearing before the International Centre for the Settlement of Investment Disputes (ICSID) in Washington DC. Equally important is the fact that EEPGL is a company that is incorporated by its three owners in three different countries, namely, the Bahamas, Barbados, and the Cayman Islands; and it is only registered in Guyana (Page 1 of the PSA).

The main implication of this arrangement is that Guyana, the resource owner, is not considered an equal in this PSA arrangement; and the Guyana Court System has been reduced in its importance.  Moreover, contract sanctity in the presence of matched unequals due to information hardships, knowledge gaps,and selective inattention by one party relative to the other, have resulted in our sovereignty being usurped by our new colonial masters, who ‘…can do whatever they want…’( https://www.kaieteurnewsonline.com/2023/04/26/govt-reversed-re-injection-of-produced-water-for-yellowtail-project/).

Given these unfortunate circumstances, it appears that we have not learnt anything from our history. In particular, it appears that we have replaced the Sugar Barons with the Oil Barons. Recall that the Sugar Barons unashamedly mistreated the people of Guyana for ‘White Gold’. Today, the Oil Barons are gearing-up like the former Sugar Barons to harvest our ‘Black Gold’ without any serious care or consideration for the people and our environment. Is history repeating itself as more oil is found?

Editor, I noticed that the total amount of money deposited in the Natural Resource Fund (NRF) during the period March 11, 2020 and March 20, 2023 is US$2.24 billion (https://www.kaieteurnewsonline.com/2023/04/20/guyana-earns-us219m-in-royalties-profit-oil-in-first-three-months-for-2023/). Given that Guyana’s share is estimated to be 14.5 percent of total revenue, it is therefore pellucid that EEPGL is smiling all the way to the bank with billions to deposit(US$15.448 billion), while Guyana from its own resources is confused with crumbs from which taxes for EEPGL have to be paid; insurance premiums have to be deducted; and environmental costs have to be subtracted. No one who owns a non-renewable natural resource should be treated in this manner; indeed, I can almost hear a local singer:

Replacing the sugar barons with oil barons;

Dem don’t care if we punishing;

all the way to the bank, dem smiling;

Drill Baby, Drill;

Eleven billion barrels and counting;

even if we watching;

we can’t do anything;

so dem saying, Drill Baby, Drill.

The environment is crying;

But dem don’t care who complaining;

For dem in charge saying;

Drill Baby, Drill.

Telling fiction at Demerara Bridge Crossing;

Truth telling gone walking;

Making more money than God;

Yet no remorse, but Drill Baby, Drill.

Who could believe we come to this again;

We have not grown; we have not gained;

Take time, reflect and reject the pain;

Without equitable sharing, no Drilling Baby, no Drilling.

The view that the Gross Domestic Product (GDP) of Guyana has more than tripled since the first discovery of oil in 2015 is a misleading economic indicator. This is because Guyana is a raw material exporter, where the owners of the largest investment are not Guyanese; and the income they earned from the foreign Direct investment are never deployed in the Guyanese economy, but are disbursed to the foreign owners of EEPGL.I would therefore contend that instead of Guyana reporting the inflated value of GDP, Guyana should be using instead, Gross National Product (GNP) as its main economic indicator. This is because GNP is an estimate of the total value of all the final products and services produced and owned by a country’s residents (Investopedia: https://www.investopedia.com/terms/g/gnp.asp). The owners of EEPGL are not Guyanese; and as a result, the estimated share of the total oil revenue captured by EEPGL (85.5 percent, some US$13.208 billion for the period March 2020 to March 20, 2023) will be excluded in GNP; and this will reflect a more accurate accounting for the economy. Additionally, a more equitable sharing of the benefits and costs of these resources must be the goal of this arrangement between the people of Guyana and EEPGL. I would contend also that this same approach of employing the GNP indicator should be adopted for gold, diamonds, bauxite, manganese, other renewable and non-renewable resources.

Editor, in closing I am reminded of the Guyanese proverb: ‘Orange yellow, but yuh nah know if he sweet’; meaning that: ‘You cannot judge everything from the outside’. Consequently, it is time for EEPGL and Guyana to sign on to a more equitable deal, for what is current is past history that Guyanese would not want experience again. Get it done!

Sincerely,

Dr. C. Kenrick Hunte

Professor and Former Ambassador 

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• Bank of Guyana (BoG), Dr. C. Kenrick Hunte, EEPGL, International Centre for the Settlement of Investment Disputes (ICSID), Washington DC

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