“Political misleaders care not for the broad prosperity of the Guyanese people, but instead for political power and pats and praise from their masters at ExxonMobil et al.” says Financial Accountant, Nigel Hinds.
It is the contention of Hinds, in an Op-Ed published in yesterday’s Sunday Edition of Kaieteur News, that the enduring political spat between Government and Opposition, following the passage of the December 21, 2018 No Confidence Motion, places the grave consequences of Guyana’s controversial Production Sharing Agreement (PSA) with oil giant, ExxonMobil, and the other contractors of the Stabroek Block, on a backburner.
What should take precedence over that spat, wrote Hinds, is that the sole purpose of Guyana’s Constitution is to have a system of governance that mandates equal opportunity and fair treatment for all Guyanese.
It is in that regard that he drew light on the two percent royalty of the Stabroek PSA. Criticism after criticism has been mounted against this royalty rate which has been described as poor. Other oil producing nations, including industry leaders, have been getting between 10 and 20 percent royalty. Venezuela has even managed to negotiate for 30 percent royalty.
Public discourse about this two percent royalty rate has taken the forefront of conversations about Guyana’s budding oil sector, as it will account for almost all of Guyana’s current estimated recoverable reserves. So far, discoveries have placed Guyana’s reserves over six billion barrels of high quality oil. While a discovery was recently made in the Orinduik Block, for which Tullow is the lead operator, that discovery only accounts for an estimated 100M barrels, while the Stabroek Block accounts for six billion barrels.
Political commentators have made calls for Ring Fencing, Tax Stabilisation Removals and other safeguards in Guyana’s interest. But Hinds contends that a higher royalty would neutralize and de-risk the tax stabilization clause and lack of ring-fencing in the PSA.
He further contends that 15 percent – not two percent – is a fair royalty for the light crude found offshore Guyana, as there is high porosity and permeability.
Hinds also alluded to the US$460M pre-contract costs racked up by Exxon, which he had described as “pulled from an alternate universe” and “a heavy yoke on the backs of Guyanese”. The accountant said that these costs should be fully absorbed by the oil companies, “as is the general practice in the industry”.
All these issues not receiving paramount attention amounts to, according to Hinds, a squandering of Guyana’s prosperity in exchange for “selfish gain and servile power”.
He said that “the local political faction will act subserviently in any renegotiation”.
But if the meager two percent wasn’t low enough, it was recently revealed by Kaieteur News that the Orinduik PSA gives Guyana even less. It allows for Guyana to get one percent royalty, but that’s not the worst part. The Contractor will be able to recover the one percent royalty in its entirety.
Hannam and Partners, a leading independent investment bank, prepared a report which stated that Eco-Atlantic, an operator on the Orinduik Block, is a very attractive bet for investment, because of the fact that the royalty the Contractor is mandated to pay, has to be given back through cost recovery.
Attention was also drawn to the fact that the Contractor will have to pay no corporate tax. A range of tax write-offs is another issue that attention has been drawn to, as a quality of Guyana’s contracts with oil companies that give Guyana less than it deserves.
Since the passage of the No Confidence Motion, a major focus of Government and Opposition has been the consequences of the motion. There have been three court rulings on the validity of the No Confidence motion. After that, there has been a ruling by the Chief Justice, Roxane George Wiltshire, on whether a Conservatory Order should be approved to halt House to House Registration, and on whether the Court should set a date for General and Regional Elections.
According to Hinds, “Our politicians are carping about the abuse, misuse, and adherence or non-adherence to the Guyana constitution, filing court actions, appealing court findings, disregarding court rulings, and emphasising the importance of the Constitution and court rulings, all for power of one racial party or another racial party.”
This is all, he said, at the expense of Guyana’s prosperity in oil.
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