A man walks into a bakery and asks the attendant for three loaves of bread. The attendant places the three loaves in a bag and hands it to the man. The man walks off without paying. The attendant shouts at the man, ‘Sir, that will be $900”
The man replies, “Exxon will pay at the end of the month!”
This newspaper has done a great service to the people of Guyana by its news stories and commentaries about ExxonMobil. Had it not been for this newspaper, Christopher Ram and Bharrat Jagdeo, the entire ExxonMobil deal may have been swept under the carpet. Imagine it took a whole year and half for the contract to be made public. It was after being made public that it became clear that the public was misled about the signing bonus.
Ironically, the government is now the one who is charging that reports in sections on the media are misleading and disingenuous. But is it not the responsibility of the government to correct those statements that are misleading or disingenuous? Why is the government not correcting the misinformation and fake news that is allegedly being churned out by the new oil experts?
It does not take much of expert to know when a loaf of bread is stale. And it does not take much expertise to do the Math and show how Guyana was taken advantage of by ExxonMobil.
Let us take another example of publicly available information and show how, based on this information, Guyana ought to have pressed for a better deal. The government by its own admission has pointed out, in released documents, that Esso, the name under which ExxonMobil trades, had pressed for a new agreement.
It has to do this because of the need for a petroleum production licence. The government therefore, was not bound by the 1999 agreement. It had the full opportunity to strike a deal that was in Guyana’s interest. And guess what type of deal it signed?
First oil comes with the Liza Development Phase 1. According to ExxonMobil, the development plans include producing 120,000 barrels of oil per day in order to develop 450 million barrels of oil. Exxon Mobil has placed the cost of developing this well at US$ 4.4 billion.
Now let us do the Math. A total cost of US$4.4 B to exploit 450 million barrels, results in a production cost of approximately US$10 per barrel. This is 20% of the estimated price of US$ 50 per barrel.
Yet Guyana negotiated a cost recovery cap of 75%, meaning that ExxonMobil can virtually recover its initial outlay in just over one year. Guyana could have gone for a cost recovery cap of 25% and this would have meant more profit oil for money and more bucks which would have bought far more than three loaves of bread per day.
Guyanese are now waking up to the reality of this deal. Simulations are now being done on what we have given up on royalty. Guyana did not even bother to negotiate a separate rate of royalty for gas.
ExxonMobil is going to spend, according to its own estimates US$ 4.4 billion on Liza Phase 1. Yet, it could not have made the investment in an oil refinery for Guyana. Nor did it wish to invest in helping Guyana to develop its gas industry.
This is an extractive agreement. No value added for the green economy. ExxonMobil will pull our oil up from our seabed and leave each Guyanese holding three loaves of bread per day when the first oil comes.
A lady wrote to the President of the United States one day asking for a pardon for her imprisoned husband. The President was touched by her petition and called her to a meeting.
When she arrived, he asked her, “What was he sentenced for?”
“For stealing a loaf of bread,” nervously replied the offender’s wife.
“Is he a good husband?”
“No,” she replied frankly, blushing a bit. “He beats me when he gets drunk, he bullies our children, he is unfaithful, and really not much good at all.”
“It sounds to me as though you’re better off without him,” said the President. “Why on earth do you want him out of jail?”
“Well,” she explained, “we’re out of bread again.”
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I didn’t use “reason” in the plural deliberately. There is one fundamental cultural, sociological and psychological... more
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