While Exxon is pumping Guyana is sailing

Dec 23, 2019 Features / Columnists, Peeping Tom

First oil has come three months ahead of schedule. But this is not necessarily good news for Guyana.
The oil companies are experienced in this sort of game; they know what they are doing. When they are finished with Guyana, we will be asking ourselves where all the oil disappeared to.
It is no coincidence that first oil has been pushed ahead of schedule just at the time when Guyana is preparing for elections and almost one year after the passage of the no-confidence motion. The oil companies know that Guyana has a caretaker – not an interim regime. They know that government is essentially marking time.
They know that they will have the first few drawdowns of oil production because regardless of the invitation for face-to- face negotiations with brokers to sell Guyana’s oil, there is bound to cautiousness within the oil markets to securing any long-term deal for the sale of Guyana’s oil, especially when such an agreement can, and most likely will be, reneged upon by any new incoming regime.
Any marketer for Guyana’s oil, at this stage – a mere three months before elections – is going to drive a hard bargain. In the meantime, the Exxon and her partners are going to have to take over the initial production until such time as elections are over and Guyana’s oil can be marketed.
Guyana has been sleeping at the wheel. There was sufficient time to get these arrangements in place. It is worrying that oil production has started production and Guyana is not in a state of readiness to monitor this production, to audit the costs of this production and the field development costs.
It is even more disconcerting that production has commenced that Guyana has no oil storage capacity or arrangements to store oil. Having our own storage capacity always provides leverage when negotiating the marketing of oil, because those doing the bidding know that we do not have anywhere to store our share of production and the marketers will take full advantage of this fact.
Every eight or 10 days a batch of oil is going to be ready for shipment. This means that between now and the elections, a total of 12 batches will come due for sale. Guyana, should symbolically have gotten the first batch or the first few batches. But with no agreement as yet for a buyer, it means that from now to March, not a blind cent will come our way.
The agreement with Exxon provides for Guyana to either sell its share to Exxon or to find its own buyers. Given the caretaker status of the government, the best option should have been to sell Guyana first batches to Exxon until after the elections.
Guyana is not ready for first oil. Kevin Crowley writing last August for World Oil magazine noted that the Energy Department is running on a small budget. He noted that five years after Exxon’s discovery, the country still hasn’t finished crafting relevant new laws or even established a regulatory body to oversee exploration and production. He also said that the government set up a sovereign wealth fund to receive as much as $5 billion in oil revenue per year by 2025, but there are no plans for how to spend this money.
He quotes Jan Mangal, a former petroleum adviser to President Granger, as saying that the oil contract was a colonial contract and that Guyana did not get a fair deal. Well, fair deal or not, the problem is that we have been sitting on our haunches for far too long and now that oil is pumping, the country is sailing into high seas in a canoe called the Department of Energy.
Oil production has started and local content legislation is still in limbo. This benefits the foreign companies and leave locals by the wayside.
Oil multinationals are here to make money. They are not here to dole out charity and to wait while Guyana gets its act together. And with first production coming on stream, Guyana has been caught flat-footed.
The announcement of first oil should not cause excitement; it should cause angst. Guyana is in serious problems with the management of its oil industry. This task seems beyond the government, something which however, will bring a smile to the faces of the oil companies. They know how when they catch a packoo, to bruk its back.

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