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Norton avoids being tied to any promise to ring-fence Guyana’s oil projects
Kaieteur News – Aubrey Norton, the Leader of the Opposition, tactically refrained from committing to the ring-fencing of ExxonMobil’s oil projects offshore Guyana, during his press conference last Thursday. This comes amid vibrant debate in the press about mechanisms to prevent revenue losses.
Leader of the Opposition, Aubrey Norton
Ring-fencing, a financial safeguard mechanism in the oil and gas industry, has been a focal point of discussion, concerning ExxonMobil’s operations in the Stabroek block. Advocates for ring-fencing assert that it could mitigate potential revenue losses by ensuring that costs from one project are not transferred to another. However, Norton’s remarks convey a reluctance to fully endorse this approach.
When asked pointedly about the matter, Norton said, “We do not see dealing with any company as a fixed, static situation. One has to, over the period as things evolve, deal with them in the particular context. It is easy for somebody to ask us, Are you going to ring-fence? And you expect a yes or no answer. For us, there is a rule for ring-fencing, but it can only be determined as you have the figures and all the information at your disposal.”
While the Opposition Leader exercises caution about the necessity for ring-fencing, five of Exxon’s projects have already been approved by the government.
To Norton’s mind, there are other mechanisms to prevent revenue losses, like auditing. “Because you could ring-fence, and if you don’t have the mechanisms to audit, it becomes another avenue for you to lose resources. So we need to, in a very structured way, develop our capacity to audit, develop our capacity to monitor. We probably might be losing more from not having those mechanisms than from ring-fencing. You have to analyze your situation and deal with the fixed situation on the ground, rather than this hard and fast approach to one tool that might be well-recommended, but not perfect in every situation.”
Norton also said that ring-fencing may not even be relevant at some times.
Elson Low, Norton’s advisor, commented that it is important to have the right “structures” in place for decision-making, and that as more information becomes available, a clearer picture of the industry will emerge to adapt strategies.
As there is no ring-fencing in place for the five Stabroek block oil developments approved by the government, costs not directly related to specific projects can be charged against ongoing production, a situation that stakeholders see as detrimental to Guyana’s financial interests.
The issue of ring-fencing has gained renewed attention as the government reviews the proposal for ExxonMobil’s sixth project, Whiptail. Government expects to approve the project in the first quarter of 2024. Advocates believe that this is an opportune moment to implement ring-fencing and rectify imbalances in the current fiscal arrangement.
While often acknowledging the potential benefits of ring-fencing, Norton now refuses to endorse it.
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