A new network of financial experts and economists is claiming that the Government of Guyana has sold the country’s oil at a price well below market value.
According to a press statement from the Oil and Gas Network, ExxonMobil has been enjoying an average 16% return on capital over the last 10 years. A similar rate of return, they argue, would’ve netted the company US$63 billion from the 3.2 billion barrels of oil in Guyana’s fields in the Stabroek block but according to the Petroleum Agreement Exxon Mobil and its partners are set to earn US$92 billion.
The network which has identified financial researcher Darsh Khusial and economics professor Tarron Khemraj as members, sets out an argument as to why the government has failed its citizens to whom the country’s oil really belong.
“Government appears to have been totally unaware of the market for oil and the opportunities for securing a better deal for Guyana,” they argued noting that the current Petroleum Agreement is based on an oil price of US$50.
“As the price goes up (Brent Crude is currently US$70) the deal gets worse for the people of Guyana. On an IMF graph, which shows how an increase in oil prices affects what an oil-producing country gets, Guyana’s deal is right at the bottom – even below Trinidad and Tobago,” the network stated.
It was further argued that even had Guyana negotiated prices at Exxon Mobil’s most recent rate of return, 6% over the last three years, Guyana would’ve benefitted much more.
A rate of return of 6.7% for ExxonMobil and its partners on the Guyana assets would have given Guyana a massive additional US$53 billion,” the network states while accusing government of meekly handing over to ExxonMobil and its partners trillions of Guyanese dollars that could and should have been spent on creating an enabling environment for the full economic, social and intellectual development of the Guyanese people and the protection of Guyana’s globally significant biodiversity.
The group of experts, questioned why government went into negotiations without “a single competent professional adviser.”
Also queried was why Government seems to have failed to take the most basic steps to get even an average price for the oil or in the absence of local expertise why financial experts, oil analysts and competent lawyers were not hired.
The conclusion they drew from these factors is that the Petroleum Agreement should be renegotiated and Minister of Natural Resources Raphael Trotman be made to relinquish his portfolio over his “continued inability to grasp how bad a deal this is for Guyana.”
The statement appears to have been released in response to Trotman’s statement that government has no current plans to revisit the production sharing agreement signed with ExxonMobil in 2016.
Speaking at a press conference last Thursday, Trotman remained adamant that Guyana got the best deal in the circumstances.
“Our resources have remained under threat for several decades. Other companies had shied away from developing offshore. Given that at the time oil was trading at US$30 per barrel and we needed a multinational company that had strong credentials; given the fact that we had a company that was keen on going to production, we felt that when everything was weighed in the balance and the value and volume of the find, that this was a partner with whom we can develop a long-term, stable relationship with and we were prepared to give concessions,” he had explained.
He further noted that benefits of a decision to partner with ExxonMobil have already started bearing fruit as the investment, subsequent drilling and oil finds here have attracted other large petroleum companies. They however would not be given equivalent concessions since it is established that there is oil here.
Additionally, Trotman explained that his government was not just hearing criticisms but would listen and take sound recommendations and advice.
It is for this reason, he said, that the Petroleum Commission Bill will see changes recommended by stakeholders who are representative of the citizenry as well as advice on best practices by regional and international experts.
These changes, he explained, include reduced ministerial powers, and more representation of civil society and the opposition.