Kaieteur News – Guyana’s President Irfaan Ali, during an exclusive interview on ITV’s Good Morning Britain (GMB) on Wednesday, voiced his government’s strong stance on ending subsidies to oil companies for exploration.
In a candid conversation with GMB presenters Richard Madeley and Susannah Reid, President Ali addressed the pressing issue of climate responsibility in light of Guyana’s recent emergence as an oil-producing nation.
During the chat, Reid asked the head-of-state about the responsibility Guyana senses, being an oil producer amidst warnings of climate catastrophe. She made reference to Guyana now being an oil producing nation after discovering oil in 2015 with production commencing in 2019.
The president emphasized that his administration’s commitment to environmental preservation had always been paramount. He highlighted Guyana’s unique position, boasting a forest the size of England and Scotland combined, with an astonishingly low deforestation rate of 0.036%.
He said too that the entire forest stands as a certified carbon reservoir, raising critical questions about the global community’s efforts to protect such valuable natural resources.
In line with the country’s newfound status as a petroleum producer, the president affirmed his administration’s support for ending subsidies on exploration and introducing carbon taxes. However, he also emphasized the need for a balanced approach in addressing these complex issues.
President Ali’s call for removal of subsidies to oil companies comes on the heels of a recent call by the International Monetary Fund (IMF) to reduce tax breaks and subsidies provided to oil companies worldwide.
The IMF reported that fossil-fuel subsidies reached an alarming record of US$7 trillion last year, equivalent to 7.1% of global gross domestic product (GDP). These subsidies surpass annual expenditures on education and comprise a significant portion of healthcare budgets, emphasizing the urgency of addressing this issue.
However, Ali’s call for the removal of subsidies to oil companies also comes at a time when Guyana has an existing agreement with ExxonMobil Guyana that grants significant tax exemptions.
Exxon operates the nation’s most lucrative oil block, the Stabroek Block, and continues to benefit from tax-free earnings due to the Production Sharing Agreement (PSA) signed with Guyana.
The 2016 PSA obliges Guyana to pay ExxonMobil’s share of Corporation and Income Tax, resulting in the country forgoing billions of US dollars annually. Furthermore, this documentation allows the US oil giant to avoid paying taxes on its overseas earnings in its home country.
However, President Ali in a recent interview with the British Broadcasting Corporation (BBC) reiterated that while his administration is aware of the lopsided nature of the deal which benefits the oil companies more, his administration will not seek a renegotiation of the deal due to the “sanctity of contract.”
The Government has faced local pressure to ensure ExxonMobil pays its fair share of taxes. Guyana received a relatively modest US$94.5 million in 2022 as royalty for its Stabroek Block crude oil; it granted ExxonMobil a staggering US$290 million in tax exemptions. These concessions extend to multinational corporations like Hess Corporation and CNOOC, further complicating the matter.
Despite legal challenges from figures like Glenn Lall, publisher of Kaieteur News, who questioned the legality of these tax waivers, High Court Judge Nareshwar Harnanan upheld the government’s authority to grant extensive tax exemptions under the Petroleum Exploration and Production Act. This ruling underscored the complexity of the tax breaks issue within Guyana’s oil industry.
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