US$657M received for this year but US$905M already racked up in debts

Jul 10, 2023 News

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Second quarter oil revenue released…

Kaieteur News – Guyana has so far received US$657 million in oil revenue for the first half of the year, but has already racked up US$905 million in debt already.

The Government of Guyana, in keeping with the provisions of the Natural Resource Fund Act of 2021 has revealed that the country has received an additional US$438 million in profit oil and royalties for the period April 1, 2023 to June 30, 2023.

According to the Government Notice published in the Official Gazette on July 4, 2023, Guyana received five payments of profit oil and one royalty payment during the period.

This newspaper understands that the country’s profit oil amounted to US$385,693,016.22 from both the Liza One and Liza Two projects in the Stabroek Block, operated by Esso Exploration and Production Guyana Limited (EEPGL), the subsidiary of U.S oil giant, ExxonMobil. Meanwhile, Guyana earned an additional US$53,256,878.46 in its lone royalty payment for the second quarter.

In total, the country received US$438,949,894.68 from its resources in the second quarter of the year. The Production Sharing Agreement (PSA) Guyana inked with ExxonMobil and its partners, Hess and CNOOC stipulate that the country must be paid a royalty of two percent on the resources sold.

The fiscal terms also allow the oil companies to recover a whopping 75 percent of the revenue earned towards the cost to develop the resources. The remaining 25 percent profit is then shared equally between Guyana and the companies. This means Guyana receives 14.5 percent of the revenue while the oil companies benefit from the lion’s share.

It was reported that in the first quarter of this year, the country received a total of US$219 million in profit oil and royalty. https://kaieteurnewsonline.com/2023/04/20/guyana-earns-us219m-in-royalties-profit-oil-in-first-three-months-for-2023/

If this is added to the second quarter earnings, it would mean that so far approximately US$657 million has been deposited into the NRF for the first half of 2023.

Research conducted by Kaieteur News revealed that Guyana has already signed close to US$1 billion in loans already for the year. This means that the country has by now borrowed twice as much as it has earned from oil production for the second quarter of the year.

In March, the government signed three loans with the Inter-American Development Bank (IDB) totaling US$205M to strengthen the country’s healthcare system, build roads and enhance infrastructure.

In May, the administration signed a US$200M Framework Agreement with the Islamic Development Bank for the reconstruction of the Soesdyke-Linden Highway.  Later that month, President Irfaan Ali announced that government had secured a US$350 million loan from Qatar to extend the Schoonord to Crane four-lane road all the way to Parika.

In June, the PPP administration inked another US$150 million loan agreement with the Kingdom of Saudi Arabia to develop the local housing and infrastructure sectors.

The four loans combined amount to US$905 million. In the meantime, the government is awaiting another loan approval soon from the United States Export Import (EXIM) Bank for US$646 million in financing for its Gas-to-Energy (GTE) project.

When approved, this would increase the total loans for the year so far to a whopping US$1.55 billion. At the end of 2022, the country’s total stock of public debt stood at US$3.654 billion. Finance Minister, Dr. Ashni Singh had also revealed during his Budget Speech that this was an increase of 16.9 percent compared to 2021.

As Guyana continues to earn more revenue from the production of its newfound oil wealth, the country has also scaled up its borrowing from multilateral and bilateral partners to fund various development projects and initiatives.

This stance however lands the nation in a dangerous trap, quite similar to the one that ensnared oil-producing states like Nigeria and Ghana, as was highlighted by Opposition Member of Parliament (MP) and former Minister of Public Health, Volda Lawrence, during this year’s Budget Debates.

She told the House, “Sir, the government’s eschewing the use of the burgeoning natural resource funds, in preference to borrowing from any and all sources, on the assumption that oil prices will remain high, thus allowing easy repayment of loans taken today, is falling into the same trap as did Ghana and Nigeria, for example.”

Lawrence pointed out that external public has grown steadily since the People’s Progressive Party (PPP) took office in August 2020.

This year, Guyana’s national debt is set to increase by $79 billion. Vice President Bharrat Jagdeo had expressed the view that while the revenue from the oil sector is “not much” presently, the government is still taking loans now for development and will pay back later when it has the “capacity to do so”.

“…So it’s a combination of spending what we have, and a judicious set of borrowing, where we know based on future capacity we can repay”, Jagdeo said.

The Alliance For Change (AFC) on Friday said that the ‘Bharrat Economics’ will doom the country’s development as the existential threat of the climate crisis will see a major shift away from the use of fossil fuels by 2030. With an already volatile market where the oil prices have been fluctuating with influence from the European war, the political party worries that the country’s prospects could be bleak with the current regime in office.

 

 

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• already, Debt, oil, quarter, revenue

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