In the previous column we explored the possibility of Guyana becoming a petro state overnight. A petro state is one in which most government revenue comes from oil royalties and profit share. The government is then tasked with spending and distributing these funds among competing interests. The last column was sceptical about the Guyanese state’s ability to effectively, optimally and fairly spend the new revenues.
By 2021 Guyana would likely earn around US$320 million per year, assuming production of around 100 thousand barrels per day and an oil price at US$50 per barrel. If the contract is renegotiated and royalties jump to 8%, the annual revenue becomes US$420 assuming no change in production rate and US$50 per barrel.
The US$320 million annual revenue will represent a little more than 10% of GDP and the US$420 million will be around 14% of GDP. Presently all the taxes Guyana collects amount to approximately 28% of GDP. However, taxes are in local currencies and the oil revenues are in foreign exchange, which we know is crucial for the smooth functioning of small economies like ours…..