New roads and gas plant will benefit oil companies rather than Guyanese

Jun 27, 2023 ExxonMobil, News, Oil & Gas

…as Guyana’s oil revenue being used to keep existing Govt. in office – Int’l financial Expert

Kaieteur News – Director of Financial Analysis at the Institute for Energy Economics and Financial Analysis (IEEFA), Tom Sanzillo does not believe that the revenue stream from Guyana’s oil and gas sector is being prudently managed to ensure future generations benefit.

During a recent panel discussion focusing on the local energy sector, Sanzillo pointed out that the government has not been prioritising saving the funds generated from the industry like Norway but has instead embarked on a massive infrastructural and energy development scheme which may very well benefit its partner, ExxonMobil more than the citizens in the country.

Director of Financial Analysis at the Institute for Energy Economics and Financial Analysis (IEEFA), Tom Sanzillo

The financial expert said with a national budget of approximately US$3.6 billion, Guyana used about US$1 billion of its oil revenue to support its development scheme. He noted, “The Budget’s doubled in the last two years from just under US$2 billion and what you have is large expenditures on capital…it’s very clear there is no plan to put the money away in a sovereign wealth fund like Norway, there is only an annual budget process and that annual budget process includes the oil revenues that come in.”

The Natural Resource Fund (NRF) Act passed in December 2021 by the current administration sets a framework for annual withdrawals from the account.

According to Sanzillo, the country’s leaders then decide how the revenue is spent. This is the second year that government tapped the fund to support its budget. Importantly, the legislation lacks strict penalties for misuse of the funds and sets no jailtime for mismanagement of the resources. The NRF Law only stipulates jail time for the Minister of Finance if he fails to report on any deposits into the oil account.

Based on his analysis, Sanzillo said the expenditure will not improve the living conditions in poorer communities which is desperately needed in Guyana. “Local leaders choose how that money gets spent every year and they have been spending it so far on capital expenditures and that is not going to support the kind of economic development in poorer communities that you want,” the financial expert detailed.

Instead, he pointed out, “It may work to Exxon’s benefit to put in new roads, it may be Exxon’s benefit to build a new gas plant but they don’t need that kind of electricity system in Guyana and who knows if they actually need the roads that are being built because there is no public process so what you have is a plan and the plan is to use the money to keep the existing political structure in power and that’s what is going to be done.”

The national budget was passed in January this year to the tune of US$781.9 billion. A huge chunk of the funds were streamed to the Ministry of Public Works to enhance the infrastructural landscape across the country. Senior Minister in the Office of the President with responsibility for Finance, Dr. Ashni Singh in presenting this year’s Budget said, “To put it mildly, our transport infrastructure is being expanded and upgraded at a pace that has never been seen before in the entire history of this country. The results are visible changes to the physical landscape and, in particular, to our transport networks.”

Kaieteur News understands that the Ministry received the highest allocation this year when compared to the other government ministries. It receiving a total of $149.5 billion to support its development plans.

In the meantime, a meagre $5 billion was set aside by the administration to cushion the high cost of living triggered in part by the global COVID-19 pandemic. Citizens have been complaining about the spiraling cost of food and transportation and other basic items, but instead of significantly improving wages for public servants, it has for the past two consecutive years increased salaries by only seven and eight percent, respectively.

Meanwhile, in the absence of a feasibility study for the multi-billion US-dollar Gas-to-Energy project, the President Ali led administration is confident that the venture will generate cheaper electricity for the citizens.

It has approached the United States Export Import (EXIM) Bank to fund its Natural Gas Liquid (NGL) facility and 300-megawatt power plant pegged at US$759 million. Oil major, ExxonMobil will be financing the pipeline aspect of the project at an estimated cost of US$1 billion.