I would like to thank everybody who read and responded to my article `First oil or fool’s gold – Guyana’s proposed oil venture and the global economy’ in the May 19th Sunday Stabroek.
Some disagree and say Guyana will get plenty money. Some say ‘renegotiate’.
The money argument assumes that Guyana will get 12.5% of production. That is impossible. Out of every 100 barrels of production Esso Exploration and Production Guyana Ltd, Hess Guyana Exploration Ltd and CNOOC Nexen Petroleum Guyana Ltd can take as much free oil as they ‘reasonably require’ for their petroleum operations going back to 1999. There is no limit. Guyana cannot verify how much oil is produced or what the oil companies take.
That leaves less than 100 barrels. The oil companies take 75% of that for their “expenses.” They pay nothing. It’s free. (Note that they can carry forward the excess every month until they recover all their “expenses” which already run to billions of US dollars.) They take 50% of the remaining barrels for free. Guyana gets whatever is left. It is simple arithmetic that Guyana will always get less than 12.5% of actual production. Guyana then has to pay somebody to sell that oil. Billions of dollars’ worth of free oil will help the oil companies to survive a bit longer in a hostile diminishing market, but this deal does not benefit Guyana.
Renegotiating for more is not an option. With great respect for Jan Mangal’s experience as an engineer at Chevron and as the former Presidential Advisor on Petroleum, I point out that oil executives are not running charities. Oil companies exist to make profit. Lots of it. No oil company will reduce profit just because some people in a tiny host country say “renegotiate”. (Imagine shareholder reaction!) Plus, Guyana has no power to force the oil companies into genuine renegotiation. The only democratic option left is for courageous citizens to uphold the rule of law and challenge illegal action in Guyana’s petroleum sector.
Fantasizing about oil wealth leaves Guyana wholly unprepared for the double catastrophes of biodiversity collapse and climate change. It also stops Guyana from adapting to the economic realities of the new world. The Seychelles get money to conserve marine biodiversity. So could Guyana. Belize has banned all off-shore oil drilling and gets money from marine tourism and research. So could Guyana. Costa Rica generates 98% of its electricity from renewables. So could Guyana. All Guyana needs is one political leader who will put country above party, power and personal enrichment.