Economist Tarron Khemraj says his computations show that Guyana’s signing bonus from ExxonMobil should have been around US$238 million and not the US$18 million paid.
Khemraj, the current Sunday Stabroek business page columnist, has written extensively in this newspaper about development issues. In his column, which appears on page 12 in today’s edition, Khemraj said there appears to be no universal methodology for determining the fair value of the bonus and that it depends on the negotiating demands of the lessor versus the oil company.
He, however, said there are some general economic principles applicable and these include risk variables, such as a radical change in regulation, nationalization and regional conflict. The marginal cost of production, the time taken to recoup the initial investment, and the average cost thereafter can also determine the size of the signing bonus. Finally, the expected or long-term market price must also be taken into account.
