Jagdeo says will not confirm whether Exxon is charging interest on multibillion $$$ oil projects

Oct 22, 2023 Exchange Rates, News, Oil & Gas

Kaieteur News – Even though the Government of Guyana (GoG) has been repeatedly condemned for managing the affairs of the country’s rapidly developing petroleum sector behind tightly shut doors, there has been no improvement when it comes to matters of grave significance.

Vice President, Bharrat Jagdeo

This was yet again highlighted on Thursday as the sector’s chief spokesperson, Vice President Bharrat Jagdeo clearly said he will not confirm a startling revelation by the majority shareholder in the Stabroek Block, ExxonMobil.

During a press engagement on Tuesday, the company’s Country Manager, Alistair Routledge, in response to a question from this publication said that Guyana is not being charged an interest rate on its multibillion-dollar investments in the Stabroek Block.

According to him, “ExxonMobil is not charging any interest on what we are recovering like for the Liza projects and the likes, we are not charging financing costs to Guyana so one of the things that’s been raised before is Guyana in debt to the Stabroek investors and it’s not true.”

Routledge continued, “The country is never in debt; that’s the beauty of a production sharing agreement, it’s the investors (that) take all that investment risk. We invest the capital and the cost recovery mechanism only pays back the dollars we have invested, (so) there is no financing component.”

In a bid to clarify the pronouncements made by the President of ExxonMobil Guyana Limited (EMGL), Kaieteur News asked the VP to confirm whether the information was factual at his Thursday press conference.

In what turned out to be a failed attempt to shed light on this critical aspect of the country’s oil sector, the policymaker made it clear that he will not be confirming this state of affairs.

The VP said, “I’m not confirming anything of that (nature). I’m not confirming anything. If he says that and there is an interest rate and there is a charged interest rate in the cost bank then it wouldn’t be allowed. So it’s a straight forward matter for me as far as I’m concerned.”

Jagdeo has constantly dodged questions relating to the interest rates being charged by the oil company.

In June this year during a press engagement, Jagdeo was asked to expound on the rates being paid to the oil companies when he deferred the question and provided an unrelated response.

Earlier in his press conference, the VP said Guyana was paying a rate to Exxon as this is a standard practice for a return to be generated on a company’s equity. “Regardless of whether you make the financing in the form of a loan or equity you have to get a rate return. There is a cost of capital and that is how it is,” Jagdeo asserted.

Consequently, this publication queried whether there was a standard rate Guyana is paying. The subject of a standard rate is particularly significant, given that Guyana has already been warned by the International Monetary Fund (IMF) that the country could lose massive revenue by failing to cap the interest rates on the investments for its oil projects.

The IMF said it is an industry norm that the government of the day disallows interests from being recovered on loans. Even if this is allowed, the administration sets a cap or limit to prevent the full interest amount from being recovered. The IMF pointed out that Guyana not only allows the recovery of the interest but also sets no cap.

In his response to the specific question however, the former President told this newspaper, “We are not paying anything. The Government of Guyana is not paying anything because they have to raise the financing using the best efforts; the cheapest cost of financing that is what they are supposed to do as a company, so this is what can be analyzed even when you look at the cost bank.”

Before further questions could be asked, Jagdeo requested that the press conference “move on”. The response from the country’s chief spokesperson on the petroleum sector casts a gloomy picture on what the true cost of capital is, and the total revenue Guyana could be losing annually on interest payments.