It is better for Guyana to ring-fence each project

Oct 20, 2023 Letters

Dear Editor,

The recent comments by the head of Exxon Guyana are true, but what he has not mentioned is the time value of money. It is better for Guyana to receive the revenue earlier so as to be able to reinvest those funds and thus increase its value higher than what could be achieved without ring-fencing a project. In addition, if a project cannot be made attractive for an investment on a standalone basis, then it should not be pursued.

Without ring-fencing the other profitable projects will be used to subsidise the unattractive project, which will cause overall profits to diminish. These are the underlying principles of Activity Based Cost (ABC) accounting. For Guyana, this is unfavourable given the current structure of the profit-sharing agreement. In the case of Exxon, they will still recover the operating costs associated with the unattractive project. The Ali administration must revisit and renegotiate this clause of the current PSA so as to maximize the value of the cash flows and profits obtained over the life of the projects.

Best regards,

Mr. Jamil Changlee

Chairman

The Cooperative Republicans of Guyana

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