Norton disagrees with Govt. foregoing revenue now for greater benefits in the future but still maintains position on lack of ring-fencing

Nov 09, 2024 News

Leader of the People’s National Congress Reform (PNC/R), Aubrey Norton (Norton disagrees with Govt. )

Kaieteur News- Leader of the People’s National Congress Reform (PNC) Aubrey Norton on Friday voiced his disagreement with the government’s approach of deferring immediate revenue in hopes of securing greater future benefits from the oil sector.

Norton was at the time speaking at the party’s weekly press conference.

Kaieteur News had reported that the World Bank’s latest Commodity Markets Outlook report, which forecasts an imminent oil surplus, has raised doubts about Vice President Dr. Bharrat Jagdeo’s projections of substantial future revenue. Jagdeo has suggested that by not implementing a ring-fencing provision for the oil projects in the Stabroek Block which is operated by ExxonMobil Guyana Limited (EMGL); the country is strategically foregoing short-term benefits to reap greater long-term gains.

However, Norton has criticized this strategy, expressing skepticism toward the notion of sacrificing current income amidst forecasts of declining oil demand and potential price drops.

Firstly, in his response to a question on the importance of ring-fencing for Guyana’s current oil projects in the Stabroek Block, especially in light of the World Bank’s projection of an oil glut and price reductions, Norton reiterated his party’s position on ring-fencing.

In simple terms, a ring-fencing provision in an oil contract ensures that each oil project is financially independent, meaning it can only use its revenue to cover its own costs.

Once a project’s expenses are repaid, profits are then split. However, the 2016 Production Sharing Agreement (PSA) with ExxonMobil lacks such a provision, and it allows Exxon and its partners Hess and CNOOC to recover 75% of monthly revenue toward cost recovery, with the remaining 25% split equally between the companies and the government.

Without ring-fencing, Exxon and its partners can allocate costs from new developments across multiple projects, which delays profit distribution to Guyana.

The PNCR leader said, “In principle, we agree with ring-fencing.” However, he clarified that his stance is tempered by a lack of comprehensive data that would allow for a clear determination of the necessity of ring-fencing every project in the Stabroek Block.

“You are operating in a situation where data isn’t provided. So, I’ve also said that we will do everything to ensure that Guyana gets more benefits from oil and gas if ring fencing is one of the solutions but it’s not the only and they are many others which we intend to approach…” Norton said.

On the issue of sacrificing current revenue for potential future gains, Norton did not mince words, describing the government’s approach as “nonsense.” He argued against reliance on distant projections, highlighting the global shifts in energy and environmental policies as a significant factor.

“We will not seek to rely of some promise of 2030 or 2040. Because the world is changing and as the world changes oil will continue to be under pressure because of the climate and environment lobby, so someone has to look at your income now ensure you maximise it, utilise it properly and not get involved in ah talking about sacrificing now for the future, the future is here in this regard,” he asserted.

(Norton disagrees with Govt. foregoing revenue now for greater benefits in the future but still maintains position on lack of ring-fencing)

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Aubrey Norton, Peoples National Congress Reform, ring-fencing, weekly press conference.

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