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Jun 16, 2019 The Story within the Story
By Leonard Gildarie
I lived in St. Maarten, a Dutch overseas territory located next St. Kitts, for six years during 2000s. One of things that struck me immediately was how laidback the locals were. By locals I am talking about the persons who were born there and owned properties. They were largely Dutch, with a large part of the 80,000-plus population migrating years before from Curacao and the Dominican Republic.
The locals are largely landlords. They held on to their properties, converting them into apartments. They made good money. They understood what it meant to own a part of their country and they capitalized on a large migrant workforce who wanted housing and other services.
I could not help but think of this over the past few days. I fell ill, and was unable to work over the past three days. But I kept abreast with the news.
We have two major things happening now, if one is to discount the situation at the Guyana Power and Light, that will reverberate in the years to come.
One is the debate of oil and how we are treating it and the other is the looming decisions from the Caribbean Court of Justice on Tuesday on the no-confidence vote.
A few years ago, Guyana learnt that our frequencies which are used by television, radio, cable and telephone companies are limited. We have to be extremely careful when monitoring this valuable resource and ensure that we get bang for the buck, as they say.
It appears that what Guyana, however, got was the short end of the stick. We gave out frequencies willy-nilly and now a number of television and radio stations are in default because they simply cannot pay the annual fees to the regulators.
I raise this issue, as it was also being debated how countries like Jamaica and India valued their frequencies so much that they are auctioning them. The monies are for the public coffers of the respective countries.
The India Times, in January this year, reported that after months of delay, India was preparing to launch the second auction of 14 blocks for prospecting of oil and gas in an attempt to raise domestic output to cut imports.
Why is this relevant? Well, it is simple. India understands the value of its resources.
With the right people who have the country’s interest at heart, billions of dollars of revenues can be secured in revenues even before a drop of oil is made.
There have been arguments that the Guyana situation is different. We need to understand why so.
In the beginning, it was just CGX. There were also ExxonMobil which secured concessions in 1999. Nobody wanted to come. It was too risky to drill offshore in what is considered frontier area.
CGX drilled a well and failed. It was not until ExxonMobil with an arsenal of technology and data struck oil in 2015 that the game changed.
Suddenly, other than Jim Jones, Guyana was on the world map and news for a different reason – black gold.
So here is the story. Around the time that oil was discovered in 2015, Guyana’s Parliament had been prorogued. We were preparing for elections.
TWO BLOCKS
It is being reported by Kaieteur News and other media houses that President Donald Ramotar signed exploration permits for the Kaieteur and Canje Blocks shortly before elections.
Amid questions, the former president said that the applications dated back to 2012 and 2013 respectively.
The former President said that both applications were processed and approved by the Guyana Geology and Mines Commission (GGMC) in accordance with the relevant laws and regulations around late 2013. He said that all fees paid were fixed by law and were paid to the GGMC, not to any private accounts.
The timing of those permits is now being investigated by the State Assets Recovery Agency.
It has come to light that ExxonMobil have farmed in on one of those concessions to help drill wells. It is being argued that the holders of those two concessions do not appear to have a track record that would have rivaled ExxonMobil in gathering the resources needed for immediate exploration.
Rather, it appears that ExxonMobil was approached and they agreed to partner.
It means that ExxonMobil now controls and has access to a wide swath of offshore oil concessions with one of them, the Stabroek Block, confirmed as containing the mother lode of oil – the sweet, light crude that oil companies so desperately want.
For argument’s sake, using the facts as outlined by the former president, there may not be any laws broken. However, there are plenty things wrong with the picture.
There is a simple analogy. You own three rice fields, all of them right next to each other. Someone comes and says they want to drill for oil. You agree on generous terms, as in any case you are not making money.
They drill and find oil – plenty of it too. You don’t have to do be a rocket scientist to be able to comprehend that the two neighbouring rice fields very likely have oil too.
You would not give that man or another person who comes knocking the same terms.
All of a sudden you are sitting at the table with sleeves rolled up, wide-eyed and bushy-tailed, ready to negotiate.
Well, we did not even, it seems, demand a signing bonus for those two oil blocks.
I am a simple man. Hindsight is 20/20. We could have done a better deal with ExxonMobil, in 2016, when the production licence was approved.
We look to good practices and examples of experienced countries and wonder where were the advisors for President Ramotar. We could have waited and assessed the situation. There was no hurry.
I don’t believe that the people of Guyana understand the magnitude of the oil find.
It is five billion barrels and counting. At conservative estimates, US$40 per barrel, that is at least US$200B in value.
ExxonMobil is investing in the first phase, about US$4B. The second phase should come on stream by 2023 and could see ExxonMobil spent US$6B. That is US$10B in investments. We are getting a two percent royalty.
ExxonMobil, according to our agreement with them, will split the profits 50/50.
Here is the problem. ExxonMobil does not have a flattering track record when it comes to playing fair. We don’t have the capacity to properly audit ExxonMobil’s expense which will have to be taken out before we split the profits.
In fact, the auditing of oil expenses by participating countries is a specialized field.
In a few months we start production. We have to quickly get our act together. There is some training and hiring of personnel, but it will not be enough.
I can’t blame ExxonMobil. They are a shareholding company with a budget that is more than 100 countries put together. They are accountable to their shareholders.
CRUMBS
Trinidad’s leader, Dr. Keith Rowley, recently said that situation has changed in his country. He warned about “accepting crumbs that fall from the table” and said it is not unreasonable for a country to demand a better deal.
Trinidad and Tobago, fast running out of oil, is fighting tooth and nail to get a better deal. It has reportedly met with some success with British Petroleum.
Guyana, I have argued before, can become a poster boy for ExxonMobil.
The company, reportedly, is ambitiously planning to double its profits by 2025, thanks largely to the oil it has found in Guyana. Would it be unreasonable to ask them for something more?
I understand the sanctity of contracts. However, like Rowley said, times have changed.
Instead of us fighting on this issue, ExxonMobil can do the right thing, the correct thing and sit with us to talk about a better deal.
There is so much that Guyana has to offer and ExxonMobil can benefit. There is a role for our government. They are not mere bystanders. They are our watchdogs; our lawyers; our negotiators, almost like our parents in this scenario.
They can leave a legacy that is like Dubai or Saudi Arabia, or we can remember them as wasting a golden opportunity.
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