Could Guyana escape the natural resource curse? Part 3

The coming petro state

The second part in this series addressed the question of how much money Guyana will likely receive. It is generally known today that the Production Sharing Agreement (PSA) is quite favourable toward ExxonMobil. We tried to understand this within the context of the Anglo-American corporate governance framework, which sees a corporation as having the sole objective of maximizing the investment return of shareholders. ExxonMobil’s profit motive is in direct conflict with the required revenues for Guyana’s development. The column also briefly explored how financial engineering might be used to maximize the cost liabilities of ExxonMobil, thereby minimizing the profit share going to Guyana. Indeed, one market analyst, Jessica Tippee – writing in Offshore back in July 2016 – noted that the PSA makes the economics of the Guyanese offshore oil attractive.

Renegotiating the PSA will not be easy because of the recent significant corporate tax cut from 35% to 21%, which allows ExxonMobil to shift operations away from the eastern countries to the Western Hemisphere and American shale oil. ExxonMobil announced this week that it will triple production in the Permian Basin to 600,000 barrels per day by 2025. Shale production is nimble and the average cost of production very competitive owing to technological improvement, thereby allowing the shale producers to reduce or rapidly expand production overnight depending on the market price…..

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Could Guyana escape the natural resource curse? Part 4

In the previous column we explored the possibility of Guyana becoming a petro state overnight.

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Could Guyana escape the natural resource curse?

Part 2 The role of corporate governance The previous essay established the developmental context under which we address the essential question of this series: could Guyana escape the natural resource curse?

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Could Guyana escape the natural resource curse? Part 1

By now many Guyanese are pondering the important concept known as the natural resource curse.

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The abuse of sugar workers and some tentative solutions

My intention was to write this week about whether Guyana can evade the resource curse, which is often associated with oil and natural resource extraction.

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