Guyana will suffer from resource curse given Govt.’s inaction on proper depletion policy, other issues – Chris Ram 

Dec 27, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – Chartered Accountant and Attorney-at-Law, Christopher Ram is of the firm conviction that Guyana is facing near-crisis challenges that prevent the efficient utilization of benefits from the oil and gas sector. Among the key challenges he noted, pertains to weak policies over which Vice President Bharrat Jagdeo appears to have sole and exclusive powers.

In an invited comment over the holiday season, Ram said he has long advocated for a depletion policy. Such a document would dictate how fast or slow a nation produces its oil resources. Ram said this weakness was also recently identified by the International Monetary Fund and highlighted in their report following an Article IV Consultation.

Ram also alluded to a report from the Inter-American Development Bank on the country’s capacity constraints, given the size of our population, the skills set available and the poor state of the sector’s legal and regulatory framework. Ram and many others are in favour of a policy that takes a strategically slower approach in producing the 11 billion barrels of proven oil reserves which according to Ram and others is understated. These reserves have all been in the oil equivalent resources in the ExxonMobil-operated Stabroek Block.

Vice President and exclusive policymaker for the oil sector, Dr. Bharrat Jagdeo has opted for the opposite. Over the years, he has contended that the rest of the world is turning away from hydrocarbons as the main source of energy. He had said Guyana therefore has a small window within which to position itself as a key supplier of advantaged barrels. He has insisted that Guyana must produce as many barrels of oil as quickly as possible before the international community and the availability of alternative energy sources hasten the phasing out of fossil fuel.

While Jagdeo has dictated that this is the depletion policy, it should be noted that there is no actual document on this matter, nor was there nationwide consultation. According to Ram, it seems that the only persons with whom Jagdeo consults are those from Exxon, with whom the country appears to be developing a symbiotic relationship. Nonetheless, Vice President Jagdeo has said the government has received expert advice from leading authorities such as IHS Markit on these matters, noting that this will be the way forward for the country.

Ram said however that people like IHS Markit and Rystad Energy are interested in securing consultancies and will tell the policymakers and oil companies what they think they want to hear. According to Ram, former Natural Resources Minister Raphael Trotman also said that he received expert advice from world class experts that resulted in perhaps the most abominable petroleum contract in the last half century. Ram asked ironically, “Where have those experts led us?”

Ram also connected the depletion policy to an education and training policy so that Guyanese can land the sector’s high paying jobs. He also advocated for an immigration policy which gives different levels of access to varying categories of persons and nationalities. He said this would ensure the country has the absorptive capacity to transition to a full-fledged petroleum economy without the great risk of the Dutch disease.

By ignoring calls for these various policies, Ram said the government is making it almost inevitable that in addition to the Dutch Disease, the country will suffer at the mercy of its sinister sibling, the resource curse. For readers unfamiliar with the term, the resource curse, also known as the paradox of plenty, refers to a phenomenon where countries rich in natural resources, like oil or minerals, often experience poorer economic growth and worse development outcomes than countries with fewer natural resources. This can happen due to mismanagement, corruption, and neglect of other sectors.

On the matter of execution, Ram claims that the PPP/C administration suffers from the ailment of loyalty over competence and gave as one of his examples, the US$214M audit fiasco involving Senior Petroleum Coordinator at the Natural Resources Ministry, Bobby Gossai. Readers would recall that British company, IHS Markit was hired in 2019 by the Guyana Government to audit ExxonMobil’s expenses in the Stabroek Block from 1999 to 2017, totaling US$1.7B. IHS Markit identified US$214M in questionable sums, which received no objection from the Guyana Revenue Authority (GRA).

Despite GRA’s recommendation to conclude the audit at that sum, Gossai continued to negotiate with Exxon for a reduced amount. It was later found by Kaieteur News that the sum was reduced from US$214M to US$3M. Following public outcry and an investigation on the instruction of President Irfaan Ali, Gossai was found culpable and let off with a warning and fined 15 days’ pay.

Ram also pointed out that the Ministry of Natural Resources is yet to provide strict guidelines on the exercise of discretion over allowable recoverable expenses.

Overall, Ram said the foregoing reflects grave weaknesses in the country’s institutional architecture for the regulation of this sector.

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• Bharrat Jagdeo, Chartered Accountant, Chris Ram, depletion, Vice President

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