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APNU still uncertain about ring-fencing
…says will discuss subject after Budget
(Kaieteur News) – The A Partnership for National Unity (APNU) is still uncertain about whether it agrees with stakeholders on the need to ring-fence projects in the Stabroek Block.
During a media conference on Friday, this newspaper asked the party’s lead Member of Parliament (MP), Dr. Terrence Campbell whether the group sees the need to implement this provision, in light of falling oil prices and the likelihood of projects being drained before their 20-year lifespan.
Last week a member of the party and former Finance Minister, Winston Jordan cited his full support for ring-fencing.
He told this newspaper, “No ring-fencing has effectively transferred all the risks of investment decisions to, and the actual search for, new oil fields from Exxon to the Government of Guyana while Exxon maintains a high premium on such investments.”
Former Finance Minister, Winston Jordan
Jordan noted that while a bright and rosy future is often painted for revenue flows to benefit Guyana, the reality is starkly different, considering the current rate of depletion and falling oil prices.
The former Finance minister acknowledged that the coalition failed to do its homework on the company which used its knowledge of Guyana to extract the best possible deal to benefit its shareholders.
Be that as it may, Dr. Campbell explained that the party has not met to determine whether it supports such a provision. According to him, “On the issue of ring-fencing I noted the comments by former minister Winston Jordan and I understand the comments, especially in light of facts…lower oil prices and so on, however as a Parliamentary team and as a party we have not discussed and formalised a position on this ring-fencing and so I would not like to jump ahead of myself and to provide an answer at this point.”
APNU MP, Dr. Terrence Campbell
Dr. Campbell could not give a definitive timeline on when APNU would be ready to announce its decision in that regard. When this newspaper invited the MP to say when APNU is likely to arrive at a position, he noted, “The immediate focus of the Parliamentary team is the budget so it will be sometime after the process is concluded.”
In accordance with the agreement, Guyana receives 12.5% of profits. ExxonMobil is allowed to take 75% of the oil produced every month to cover its expenses and also enjoys a 12.5% profit share. In addition to its 12.5% profits, Guyana also receives 2% of gross production as royalty.
Notably, after the contractor recovers all of its expenses to develop the resources, Guyana would be eligible for 50% of all production, minus operating expenses from the projects.
With more and more developments being approved in the absence of a ring-fencing provision, the country has been receiving meager profits, delayed to facilitate cost recovery. This provision would ensure the country receive half of the profit after paying off the development costs.
This newspaper recently reported that the blistering extraction rates in the Stabroek Block led by ExxonMobil have slashed the projected lifespan of Liza One and the Liza Two developments. What should have been a 20-year project life for each development has been reduced in half as the oil remaining will only last for another three years’ time.
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