Chicken feed money and cost issues

The previous six columns asked the question whether Guyana could escape the natural resource curse. We have looked at the issue from various dimensions. In particular, we have observed that initial conditions prevailing in Guyana must be taken into account when making such a prediction. The present structure of the production economy and limited economic research capacity in the public service were identified as initial conditions that must be surmounted if the country is to evade the curse. There are still a few crucial initial conditions we must explore; therefore, we will continue probing this crucial question in a fortnight.

Today let us examine the heightened debate about the amount of revenue Guyana will realize. The government’s side of the debate was presented by Minister Dominic Gaskin. He sought to shift the debate away from the percentages, rates and bonus to the expected aggregate inflow of revenues the government is likely to realize once production reaches 500,000 barrels per day. Mr Gaskin made a good point that Guyana does not have the capacity to exploit this natural resource. Therefore, a partner with finance capital is needed. He noted also that going back on the contract will send a message of uncertainty to foreign investors.

Ms Kimberly Brasington from the local affiliate of ExxonMobil echoed a similar perspective about reneging on the contract at this stage. While Mr Gaskin was more aggressive in his posture, Ms Brasington delivered a subtle threat. She made it clear that changing the contract now will turn investors away from Guyana. The threat is credible since this is the way world capitalists operate. They not only read the news and follow keenly the business and financial press, but also meet at country clubs and golf courses. If they want to disrupt your market access they will do just that…..


The half-good oil contract may or may not bring chicken feed money

The previous column critically analysed the cost components of the production sharing agreement with ExxonMobil.

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Oil and other sectors

Part 6 The previous column explored how the lack of economic research capacity might have contributed to the lopsided contract in favour of ExxonMobil.

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Economic research capacity and the oil contract Part 5

Making predictions in a complex and non-linear world often involves identifying initial conditions and then sequentially reasoning (or solving) forward.

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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 3

The second part in this series addressed the question of how much money Guyana will likely receive.

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