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Govt.’s hiding of oil companies’ interest rate a major blow to citizens – AFC
Kaieteur News – Former Head of the Environmental Protection Agency (EPA) Dr. Vincent Adams has once again called out the government for hiding the interest rates being recovered by ExxonMobil saying it is a major flaw in managing the sector.
Former EPA Head and AFC member Dr. Vincent Adams.
He made the comments last Friday at the Alliance For Change news conference. Adams was asked to state their position on the government’s refusal to join the rest of the oil- producing world on capping the interest rates. Adams said: “Well all of that comes in part of the negotiations and the other thing is we do not even know what the interest rates are. So that is one of the major flaws in how this government is managing this oil sector. There is no transparency whatsoever you would think… the question has been asked by the newspapers, all the major newspapers in the country, what’s the interest rate that we are paying Exxon or wherever the money is coming from…That has never been revealed so we do not know what the interest rate is.”
He added, “It should have been made public, everybody should have known, rather than speculating and trying to back calculate stuff. So I do not know, what the interest rate is, I do not know if it’s better than some capped. Let’s say if we cap it at 10%, I do not know if our interest rate would never go above 10% or whatever that number is.”
The AFC member is of the belief that what needs to be done is “of course to approach Exxon to renegotiate this contract to make sure the interest rate will be one of the consideration that we will have to look at in terms of our financial well-being.”
The AFC has been saying over the years that they support making the interest rates public so that citizens can have an idea of what is being recovered by the oil companies. Last November, this publication reported Dr. Adams flying the government for the lack of transparency in the interest rates which ExxonMobil is charging Guyana for its multibillion-dollar investment in the country’s oil sector.
It must be noted that several countries including neighbouring country, Suriname do not allow oil companies to charge interest on their investments. Previously, VP Jagdeo said Guyana was paying a rate to Exxon as this is a standard practice for a return to be generated on a company’s equity. “Regardless of whether you make the financing in the form of a loan or equity, you have to get a rate return. There is a cost of capital and that is how it is,” Jagdeo asserted. Despite multiple attempts by this newspaper to clear the air on this issue however, the government has refused to tell the nation how much interest was being charged on the companies’ investments. ExxonMobil and its partners, Hess and CNOOC each make annual equity contributions to support the Stabroek Block operations. Consequently, the companies each receive an interest on the financial investments. This rate of return, though justified by Jagdeo remains a mystery, although this country’s resources are being used to pay those companies.
ExxonMobil is free to recover the interest, expenses and fees incurred on loans for the development of the resources in the Stabroek Block, without consent from the Minister responsible for Petroleum. This is outlined in the 2016 Production Sharing Agreement (PSA) Guyana signed with ExxonMobil and Co-Venturers, Hess and CNOOC. Annex ‘C’ of the Agreement, specifically in Section 3.1, which governs costs that can be approved without the Minister’s approval states: “…interest, expenses, related fees incurred on loans raised by the Parties comprising the Contractor for Petroleum Operations and other financing costs provided that such expenses, fees and costs are consistent with market rates.” The government, despite repeated requests, has been reluctant to disclose the interest rates being charged by the developer.
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