Guyana will not copycat Suriname’s approach to prevent oil companies from recovering interest rates on investments

Guyana will not copycat Suriname’s approach to prevent oil companies from recovering interest rates on investments – VP Jagdeo

Oct 29, 2023 ExxonMobil, News, Oil & Gas

Kaieteur News – While Suriname disallows the recovery of interest rates on loans by oil companies, Guyana will not be mimicking that approach, says Vice President, Dr. Bharrat Jagdeo.

Vice President, Dr. Bharrat Jagdeo

During his most recent press conference, Jagdeo said it would be dangerous for Guyana to simply cherry-pick or copy-cat how some countries manage fiscal issues in the oil sector without examining its implications for investments in Guyana.

The chief policymaker for the oil sector said the government had its technical advisors examine the competitiveness of the new fiscal regime in place for oil blocks which allows the recovery of interest rates under certain conditions.

Jagdeo said, “…competitiveness is defined by not just how much you take out like royalty or profit share but there are other measures that can impact on the finances of a company. Now clearly, from that analysis they (government’s advisors) pointed out that our regime, for the future, will give the country a total take of over 60 percent of production operations of the company.”

The Vice President added, “If you keep layering on everything then you run the risk of not being competitive.” He said too that cherry-picking one element of a regime for one country without looking at its overall impact in that country and then what that means for Guyana, could have serious implications for investments.

The Vice President said he is very much aware of the theoretical benefits of capping interest rates to disincentivize the practice by oil companies using loans to fund projects.

Jagdeo said government is in a position to implement stringent safeguards in the new Production Sharing Agreements (PSAs) governing shallow water and deep-water blocks. He said government can justify the mechanisms used therein and how that lends to total government take being over 60 percent. He said however that government cannot justify the PSA terms in the Stabroek Block contract which allows uncapped interest rates to be recovered. Notably, that contract was signed by the former APNU+AFC regime back in 2016.

While the government has refused to heed calls to cap the interest rates in the Stabroek Block projects to prevent abuse, Jagdeo said this is an area that the government will continue to keep a close watch on.

With five projects sanctioned thus far for the Stabroek Block, and worth a staggering US$40B, the Guyana Government has not confirmed or denied if Exxon is charging the nation interest on loans and how much those rates are.