Aug 29, 2017 News
By Abena Rockcliffe-Campbell
Guyana would do well to set up a national oil company. That company should be given a block
where oil is suspected to be. It can then partner with a well-established oil company which has the necessary technology to drill.
That notion was put forward by former Chairman of the Petroleum Company of Trinidad and Tobago (Petrotrin), Donald Baldeosingh, who explained that the presence of at least one local company is very important to the stabilization of a country’s oil industry.
The Trinidad national told this to Kaieteur News during an exclusive interview.
Baldeosingh’s recommendation would be nothing new to the world. Many oil-rich countries have national companies. These include Norway which has Statoil; Brazil which has Petrobras; Mexico which has Pemex; Trinidad has Petrotrin as well as a national gas company and Suriname has Staatsolie. Also, Colombia has (Ecopetrol); Malaysia has Petronas; and Russia has Gazprom.
Trinidad and Tobago established its company since 1975.
Baldeosingh told Kaieteur News that a government has two major roles to play when running a country with an oil industry. The first is the role of the regulator. This includes establishing policies and ensuring that players adhere to the rules and the regulations of the industry in conformity with the policy objectives of the State.
Baldeosingh said that the other role to be played by the government speaks to spurring the development of the industry and sustaining such. Baldeosingh said that it can be very difficult to spur development as the regulator. He said that that job would be made much easier to accomplish “if you are also a player in the energy industry.”
“So instead of giving out a block to a company, you can have Guyana’s national oil company partnering with that company in the block,” Baldeosingh explained.
He said that the directors on the board appointed by the Government of Guyana will have access to all the information on the operations of the business. So there is a lot more transparency in that model.”
Baldeosingh went on to highlight more benefits of having a national oil company.
He said, “If you are also an operator it means that people cannot hold you to ransom.”
The former Petrotrin Chairman said that in the past, when “times got hard,” foreign oil companies that operated in Trinidad and Tobago “dropped out the picture and handed over to locally-owned companies through mergers and acquisitions. Sometimes, they (foreign companies) do not stay for the long haul. When hard times came they up and left, whereas, the state-owned company will be more inclined to ride out the hard times.”
Baldeosingh said that national oil companies may operate elsewhere, but are proven loyal to their home country. He said that national oil companies, like Petrobras, may operate elsewhere, but play an important role in the home country
“You have someone to pick up the slack when the foreign companies want to drop out. Foreign companies analyze the opportunity in your country compared with all the other portfolio elsewhere in the world, and if it becomes better to drill in Algeria or the United States they go there and slow down what they do here, because it is not as profitable.”
Baldeosingh spoke about a model that Trinidad has, where independent businessmen have a claim on a national company. He spoke about the Phoenix Park Gas Processors Limited, which is a plant that extracts the liquids from gas and sells those. He said that the government of Trinidad and Tobago placed shares from the company on the stock exchange and several Trinidad nationals bought into it.
The former chairman said that there are several benefits to be derived from a model where citizens have a share in the company. An obvious one is that citizens will get direct financial benefits of their country’s natural resource. But another benefit highlighted by Baldeosingh is the prospect of minimizing corruption.
“The more the players the harder it is for the company to go off course.”
Even as Baldeosingh put forward the many positives that are to be derived from the setting up of a national oil company, he admitted that there may be some negatives. He said that a national oil company may be plagued by the same kind of ailments that affect any state company.
“A lot of state companies are sometimes not well run, not efficient, and are often accused of mismanagement and corruption. Baldeosingh said that this often happens because state-owned companies do not have shareholders that private companies have, looking on at what they do. “
He continued, “They seem to operate with a lot more room to do things that are probably not in the best interest of the shareholders.”
The former chairman pointed to what is currently happening in Brazil.
“Look at what is happening with Petrobras. Lots of people are finding themselves in jail over deals that Petrobras did. So the downside is that you have to try to run a national oil company that observes basic principles of accountability and transparency. I think the best way to make it work is to have a significant number of independent directors on the board who are not appointed because they are a friend of someone.”
Indeed, many persons have been jailed in Brazil in connection with corruption at Petrobras. Sentencing has been made for up to 25 years.
Former Trinidad and Tobago Minister of Energy, Kevin Ramnarine has made similar comments to those made by Baldeosingh. However, he did not go into as much detail.
Ramnarine’s comments were made at a lecture facilitated by the Guyana Oil and Gas Association (GOGA).
At that forum, Ramnarine said, “Guyana needs a flagship national Oil and Gas Company. This company’s board and management must be insulated from politics. A percentage of this company’s equity must be listed on the Guyana Stock Exchange. This will allow institutional investors and citizens the opportunity to directly own Guyana’s oil industry.
“It will hold equity in upstream blocks and participate in the marketing of crude oil. I would recommend that a separate company be formed to develop the support infrastructure for the industry with private sector participation and a separate company formed for marketing. That would be three separate state companies.”
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