Sep 04, 2022 News
– stakeholders sing praises for NRF, Local Content Laws
– others want more done to shield country from “most abusive deal ever inflicted on a sovereign people”
By Kiana Wilburg
Kaieteur News – A review of the Government’s management of the oil sector by some industry stakeholders has solicited a bag of mixed views. Some observers are in high praise of the PPP/C Government’s stewardship of the industry, stating that the administration has moved faster than its predecessor to implement key aspects of the legislative armory needed to regulate the sector while maximising gains for citizens. They have also contended strongly that the Government has done an exceptional job in managing the economy in the face of external shocks stemming from the Russia-Ukraine war.
On the flipside, some stakeholders hold the view that the Government has not done enough, specifically as it pertains to closing critical loopholes for revenue leakage, corruption, and abuse in the 2016 Stabroek Block Production Sharing Agreement (PSA).
International Lawyer, Melinda Janki, in an interview with this newspaper said the 2016 PSA represents “one of the worst, most abusive and exploitative oil deals ever inflicted on a sovereign people.” Janki said the PPP/C administration was very critical of the contract when it was in Opposition but has done little to nothing to plug key loopholes such as those pertaining to ring fencing. (Ring fencing provisions allow for costs associated with one project, to not be charged against the revenues made in another, thereby reducing the profit available to be shared.)
She said, “The ExxonMobil deal gives the Guyanese people 12.5 barrels of oil out of every 100 barrels of oil, plus a tiny 2% royalty. Exxon’s affiliate and Stabroek Block Operator, Esso Exploration and Production Guyana Limited (EEPGL) and partners get everything else. They get around seven times what Guyana gets for its oil. When people demand a better deal, the Government says Guyana should not get more money because the PPP/C cannot spend it fast enough. But the oil money, like the oil, belongs to the Guyanese people not the Government. People need money to put food on the table. They need money for their children’s health and education.”
Taking these and other factors into consideration, Janki said Exxon’s operations are not only exploitative but an environmental danger to the country and the Caribbean. She believes the Government can, and should, do much more to protect the country from the flawed 2016 PSA.
Former Finance Minister and Economist, Winston Jordan also shared similar views as he raised concerns about the pace at which Government is spending revenues from the NRF. Jordan said he is of the impression that Government is running a sprint and not a marathon with the spending of the oil money. Given the abnormal circumstances which have gripped economies worldwide, Jordan said increased spending will no doubt lead to wastage. He said, “With two oil ships alone, oil will account for almost 60 percent of exports and that is the non-oil nightmare that is bracing us. We need a national development plan for oil which takes into account that it is a very fickle product. We need a plan that has seen widespread consultation. The people must have a say in how their money must be spent.”
Other stakeholders provided contradictory views, as they noted there is much to praise the government about as regards bringing a sense of order and direction to the industry.
Economist and Executive Director at the Georgetown Chamber of Commerce and Industry (GCCI), Richard Rambarran, was keen to note that he believes the Government has given strong stewardship to the oil and gas sector as well as the macroeconomic conditions of Guyana. Rambarran who was recently appointed to serve on the NRF’s Investment Committee said, “The Government has undertaken institutional and legislative steps which have served as steps in the right direction. I am particularly pleased about the Natural Resources Fund revision, the Local Content Act, the establishment of a functioning Local Content Secretariat, prudent management of our public debt and macroeconomic stability and acceleration on the gas to energy project.”
Specifically, Rambarran said the revision of the NRF law with key areas being strengthened serves to mitigate the effects of the natural resource ‘curse’ while adding that the passage of the Local Content Act and the establishment of the institutional mechanism of the secretariat will see benefits redound to Guyanese entrepreneurs from all walks of life. A notable point he said has been the fact that the Government is avoiding the pre-source curse through resisting the temptation to borrow against expected/projected revenues from the sector. Rambarran said these three policy measures having been accomplished in 24 months demonstrate the seriousness with which the administration is taking the development of the petroleum sector and the fulfillment of their promises.
“I anticipate continued development with the acceleration of the gas to energy project. This project will ensure that our natural gas resources are utilised with their greatest economic value and inducing a strong multiplier effect throughout the economy,” the Economist expressed.
Director of Energy Practice at Americas Market Intelligence (AMI), Arthur Deakin, also praised the Government as he noted that it has done an exceptional job in creating an investor friendly environment for the oil sector. Deakin commented too that the pace of field development is quite impressive.
“Essentially, Government has laid the foundation for a prosperous business environment,” said the analyst.
Be that as it may, he said the Government can improve on being more transparent on stating where the oil revenues would be spent. He also reiterated previous calls for the establishment of a Petroleum Commission to ensure the independent management of the sector.
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