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Sam Hinds says lack of ring-fencing benefiting Guyana
…urges Guyanese to “pray for patience” as flow from oil money set to increase
Kaieteur News – As Guyanese and independent global organizations continue to call on government to implement a ring-fencing provision, to allow the country to enjoy the early proceeds from the petroleum sector, the former President and Prime Minister of Guyana, Samuel Hinds has said that the lack of this key clause works in favour of the nation.
Former President, Prime Minister and Guyana’s Ambassador to the United States, Samuel Hinds
Guyana’s Ambassador to the United States in a letter to the editor Kaieteur News on Saturday continued the conversation on an article that was published by the newspaper indicating that Guyana should have received US$10B to date but has only received US$4.4B.
Hinds said he believes that the additional money Guyana should have received was affected by taxes and ring-fencing. After explaining that governments usually accept royalty and profit payments in the place of taxes, he shifted his attention to ring-fencing.
Ring-fencing in the petroleum sector would simply require each project to pay its own development costs. Guyana did not implement such a provision, leaving Exxon to use the revenues from projects producing oil to invest in other developments. In this manner, the proceeds available as profits are significantly reduced.
Hinds is adamant that this current arrangement not only works in favour of the oil companies, but the government of Guyana as well.
The former President wrote, “One should also note that the lack of ring fencing (if ring fencing was unilaterally enforceable) facilitates further rapid exploration and development of the field. Yes, it may be argued that it is like us financing further and faster exploration and development of the Stabroek block. That benefits Exxon and benefits us too.”
With oil prices likely to drop in the future as the world transitions to cleaner energy sources, Guyanese have been relentless in urging government to ring-fence the projects for Guyana to see the flow of greater deposits into the Natural Resource Fund (NRF) or the oil account.
Ambassador Hinds however explained that, “As long as there is a certain level of continuing discovery and development, today’s foregone payments would in time be received by us. True, there is the issue of “delayed” payments and the time value of money. Certainly, these considerations quickly become complex and complicated – where lawyers and accountants make their money; but after all of that, a judgement has to be made on what would turn out better for us.”
He therefore called on Guyanese to drop the “emotional interpretation” of his words and “pray for patience” as the flow from oil is “steadily growing much larger”.
Presently, Guyana could have been receiving a greater share of profit from the three projects producing oil- Liza One, Liza Two and Payara. This, as Exxon has since recovered over US$19B from the Stabroek Block, well above the cost for the three projects.
Sam Hinds says lack of ring-fencing benefiting Guyana
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