Proximo is an Exxon blogger, reminds of a PPP writer (also an Exxon mouthpiece)

Oct 26, 2023 Letters

---

Dear Editor,

Proximo is a blog-name. He blogs regularly on the pivotal issues of the Oil Contract in the SN online edition of the paper. Here is Proximo’s blogpost on GHK Lall’s letter titled, “Unlike, Guyana, Exxon prefers to maximize its cash flow now” (SN Oct 20^th):

“The rapid expansion of operations which will be facilitated by taking less funds out of the business will translate to higher revenues and profits in the medium term. Another option is to fund the expansion using debt which is more costly than organic growth and which will reduce profits. That profit reduction will affect Guyana significantly since the largest share of Guyana ‘s funds come from profits (12.5% from profits and 2% from revenue)”.

Proximo is making a devious and false argument. Although he didn’t use the phrase “Retained Earnings” (RE), that’s exactly the concept he is talking about. In a regular business owned by shareholders, the BoD declares profits quarterly, and usually declares one portion of those profits as dividends and the other as Retained Earnings. Retained Earnings are ploughed back into the business, expanding the business, say building a second and third factory and so on. Production rises and so are revenues and profits. The Retained Earnings reinvested in the business produces bigger profits for its owners, the shareholders.

Guyana is not a shareholder in Exxon’s business of oil extraction; and therefore, cannot benefit in the same way as shareholders do: bigger shares of profit as a result of expansion of the business made possible by reinvesting Retained Earnings. Guyana’s ‘take” will remain fixed at 14.5 barrels out of every 100 (in other words, 14.5% of revenues).

So, what exactly is Proximo talking about – “[Guyana] taking less funds out of the business will translate to higher revenues and profits . . .”? Has Guyana knowingly agreed to take lower royalty (2% vs Suriname’s 6.25%); Exxon’s higher levels of CR, Cost Recovery (75% vs Suriname’s 60%); fixed “profit-share” at 12.5% of revenues and zero corporate income tax – in exchange for Exxon’s taking its premium share of revenue (creamed from the lopsided contract) and reinvesting it in a second and third well and so on – and now Proximo is claiming Guyana stands to benefit from the expansion?

Surely, if extraction rises from ½ a million to one million bpd, Guyana will receive more revenues. But Guyana’s take is still based on the rate of 14.5 barrels out of every 100 barrels – or 14.5% of revenues. Proximo’s argument boils down to this: I am happy to take “pennies a barrel” for my oil resource – as long as Exxon expands extraction from ½ a million to one million to two million barrels. Higher millions of barrels times “pennies a ton” means more revenues for Guyana. This is not a higher share of revenues for Guyana. It is plainly letting Exxon plunder Guyana’s resources at a higher rate and paying the same rate – 14.5/100 barrels.

Proximo’s argument is made for fools and simpletons. Proximo’s devious and false argument is more akin to Guyana’s colonial govt in the 1920’s signing a contract with Alcan to mine our bauxite for “pennies a ton”. The irony with that Alcan deal vs today’s Exxon’s is stark: Back then Guyana was run by a govt controlled by the plantocracy; today Guyana has an elected govt – and Guyana is now a Sovereign and Independent State. Guyanese people still ask every day: Why can’t GoG renegotiate the contract to get one that is “a little bit less lopsided”. Yes, “a little bit less lopsided” – because as President Ali said: “Renegotiating with an Oil Giant is like renegotiating with a Superpower”. He implies no small country like Guyana can negotiate anything with an Oil Giant.

Proximo must know that in many PSAs around the world, the average “take” of most oil-host countries is 55/100 barrels. Guyana’s “take” will always be 14.5/100 barrels. Prof Kenrick Hunte has crunched the numbers on Guyana oil operations over the last 4-years and proved that Guyana’s take has not risen above 14½ /100 barrels. The reason for Guyana’s low rate – 14.5% of revenues is the absence of ringfencing. Ringfencing of each project’s CAPEX will allow CAPEX to be paid down, and as it is paid down, Guyana’s take will surely rise from its current 14.5/100 to much higher and eventually to 50/100 barrels.

What might be Proximo’s real name? Where does he work? We may never know. In the business of newspapers, publishers are bound by law to protect their bloggers’ real names. I must point out however, that the same kinds of stuff Proximo writes are exactly the same things Joel Bhagwandin writes. They are willing to sell out Guyana’s crudes at the 14.5/100 barrel rate instead of the universal rate of 55/100.

The concept of ringfencing is thrown out the window. Commingling CAPEXES among projects (several oil wells, oil fields) would make sure Guyana’s take of revenues will not rise above 14.5/100 barrels.

The Proximos of Guyana will make sure Guyana becomes Exxon Guyana. I have absolutely no doubt in my mind that Proximo is no ordinary blogger – but is working for the benefit of Exxon’s shareholders. He must know that Guyana is losing/foregoing upwards of $100 billion to Exxon on this very egregiously lopsided contract.

Yours truly,

Mike Persaud

---

• GHK Lall, Guyana, Mike Persaud, Proximo’s, Retained Earnings

---