APNU still weighing pros and cons of ring-fencing oil projects to give Guyanese more benefits

Dec 22, 2023 ExxonMobil, News, Oil & Gas

Kaieteur News – The A Partnership for National Unity (APNU) political grouping on Thursday disclosed that it is still weighing the pros and cons of ring-fencing oil projects in the prolific Stabroek Block.

Shurwayne Holder

During the Opposition weekly press conference, Economist Elson Low and Party Chairman, Shurwayne Holder were confronted with queries regarding the possibility of ring-fencing projects within the Stabroek Block, managed by ExxonMobil Guyana.

The 2016 Production Sharing Agreement (PSA) signed by the previous Coalition government, stipulates that a whopping 75 percent of the monthly revenues are to be deducted as costs to repay the companies’ shareholders, while the remaining proceeds are split as profits equally with Guyana. In the absence of a ring-fencing provision, the companies have the leeway to use the profits from producing oil projects to pay for others that are yet to commence production. A ring-fencing provision would therefore prevent oil companies from using revenue generated from a production field to offset costs in another project. It would also mean that when that project cost is repaid, Guyana would enjoy 50 percent of the revenue generated there.

Expressing discontentment, party representatives criticised the Government of Guyana’s recent 6.5% across-the-board salary increase for public servants. Low labeled the raise as a “slap in the face” to these essential contributors across vital sectors like healthcare, education, national defense, and infrastructure development. He stressed the nation’s fiscal capacity, buoyed by a substantial national budget and burgeoning oil revenues, advocating for higher wages and a fairer distribution of wealth.

Elson Low

He said ,“for the next Coalition government, our budgeting will put people first and at the centre of national development. We see this not only as a moral obligation but as an economic investment in our human resources. Our budgets therefore will reflect this philosophy.” When pressed about potential implementation of a ring-fencing provision under a future Coalition government, Holder said the Coalition is committed to maximizing benefits for Guyanese citizens. Holder added, “A lot of other things that can be done in the confines of this contract…so there is no excuse for us still being poor in this country, no excuse.”

He emphasised that upon assuming government, provisions within the oil contract would enable, the Coalition “to sit and to work out the maximum benefits that we can gain from the existing contracts and I am committing that when we take government we are going to do that.”

Moreover, he said that the party has to deal with ring-fencing from an informed position. He then underscored that they are advantages and disadvantages to ring fencing. “So it is an issue that we are conscious of but as I said, our key focus doesn’t lie in ring-fencing or the other measures our key focus is to get the maximum benefit from our resources and allow it to meet the people. So that will be our focus, we will have to look at it in a holistic manner and as I said, we will have to weigh pros and cons before we move forward so we don’t want to make a definitive statement to say well ring fencing will be in this discussion of not, we will look at it holistically,” Holder said.

Notably, a few months ago, Vice President Bharrat Jagdeo has finally accepted that ring-fencing the oil projects will allow Guyana to benefit more from the wealth generated in the resource-rich Stabroek Block, immediately. Despite his acceptance however, the VP is unwilling to affect any changes to the lopsided deal that United States oil giant, ExxonMobil and its partners.

For his part, Low stressed the importance of informed decisions, seeking expert advice and considering economic dynamics before determining the best course of action in relation to ring-fencing the oil projects. “What we have said is that there is a range of options that we will speak to the operator regarding…Now ring fencing is one of those options. However, we will evaluate closely how we will approach each option because they are different economic dynamics that we need to make sure are properly accounted for so we believe that we have already started that and we will engage in that conversation,” he added.

Low explained that the next Coalition government will not adopt the approach to make demands, but to have discussions with the oil companies and experts before making a decision.