Category: Uncategorized

Why Oil Alone Will Not Make Life Better for Guyanese

The choice we make on March 2 would determine the direction we take, the Nigeria way by choosing the Cup or the Palm Tree or the Dubai way by selecting the brightly lighted bulb.

The following is extracted from the statement of Robert Badal at the Change Guyana weekly press conference of 7 January:

According to Bloomberg, the global markets created US$14 trillion in 2019.
Wealth is created at every corner of the globe except in Guyana. A stone’s throw away, Trindadian non-oil sectors exported over US$1B in 2019.

On the local scene, the value of our agricultural exports, manufacturing and local businesses are on the decline. Our national debt on the rise at over 60% of GDP, reserves at under three months of imports. Our unemployment looms at over 30%, and expenses from the public purse keep rising while private consumption is on the decline. This as a result of strangulation of the private sector with extortionary taxes.

These are all symptoms of a fragile, poorly managed economy.

The point is that other oil-producing countries are working at diversifying their economy. They know that oil revenue alone will not sustain them long-term. But here, our politicians’ only answer to every problem is “oil”. In fact their narrative of an oil economy as the only answer to our problems of poverty is a reflection of their incompetence, lack of strategic thinking and woeful leadership failures over decades.

The fact is that oil is a finite resource. Even though it could bring transformative economic contribution, while it exists, it should be used as an opportunity to strengthen other sectors which will outlast the boom times. It should be used to build capacity, modernize our infrastructure and diversify our economy for long-term economic sustainability.

There is widespread belief that the APNU Government failed us in its contract negotiations with oil majors. After oil was discovered in 2015 the Administration had two years to seek competent, professional advice from industry players but omitted to do so.

The result was a production-sharing agreement that is unfair to our interests. It is a contract where the oil companies not only earn the revenue from our natural resource, but they do it at no final cost to themselves: they will recover all exploration, development and production cost before sharing the profit with the country. Not only that, they will be exempt from all taxes for themselves and their contractors, a stabilization clause that exempt them from any changes in legislation, fiscal measures, any review, even requiring us to pay their share of income taxes.

A royalty of a mere 2%, share of profits only after cost recovery, no bond in case of environmental disasters. Even the signing bonus of US$18M is disrespectful to the dignity of Guyanese. Given the quantum and quality of our reserves we should have insisted on US$500M.

Why couldn’t we have negotiated a simple contract, royalty-based, where the profits of the investors and their subcontractors are taxed in the normal way as local companies are, one under which the return to Guyanese is certain, easy to administer; instead of the complicated production sharing agreement, where cost incurred by the oil majors are difficult to verify but nonetheless passed on to the Guyanese people.

Given our lack of experience and capacity, and the Government’s obvious refusal to seek expert advice and intervention, won’t a royalty based agreement best serve our interest?

Who was in charge? Where was the Cabinet of 30 Ministers whose mandate is to protect our interests? What were they discussing every Tuesday? Where was President Granger? Where was the leadership and honesty he is now boasting of on the Campaign trail? Where was the Opposition leader and his parliamentarians? Where was the oversight of Parliament?

The fact is that in the midst of enormous public outcry our Government ignored us. We have been sold out in a manner unforgivable. Yet no explanation from the President, no inquiry, no action to hold those involved responsible, no commitment to do better on future contracts.

Poor governance, lack of transparency and accountability, the same failure of Leadership that destroyed the livelihood of bauxite and sugar workers continues. The same creators of big, repressive and incompetent Government that extort heavy taxes on ordinary Guyanese citizens but exempt foreign multinationals from similar taxes.

Today we remain the poorest in the region after Haiti with a per capita income of less than US$4000 compared to little Antigua of US$17,000. What a shame?

Let’s pause to look at the experiences of Nigeria and many other countries where oil resources have failed to transform the lives of ordinary people because of corrupt leaders.

Nigeria produces one million barrels of oil a day. Yet after more than 60 years it has 94 million people under poverty, 57 million lack safe water, 130 million lack adequate sanitation and 10 million children out of school, according to a World Bank report. At the root is a culture of corruption combined with a political elite out of touch with the daily struggles of average Nigerians.

Between 1960 and 2005 some $20 trillion was stolen from the treasury, more than enough to alleviate such poverty.

The questions are: Where would our rich oil and gas resources take us? Would we follow the path of Nigeria and neighboring Venezuela with the same results? Or the path of Dubai or Norway. The choice we make on March 2 would determine the direction we take.

Will we continue to place our resources and our kids’ future in the sticky hands of the APNU/PNC or their lookalike the PPP? Or would we be smart this time to seek honest, credible, smart Leaders for a new direction to prosperity? Would you continue to believe that those that did nothing for themselves could do things for you?

The point is that the choice we make on March 2 would determine the direction we take, the Nigeria way by choosing the Cup or the Palm Tree or the Dubai way by selecting the brightly lighted bulb.

Defining Transparent and Inclusive Management of Oil Revenues

Of particular importance is a plan to direct monies from the sale of exploration rights into a fund owned by the government and people of Guyana, in which every Guyanese person would be a shareholder from birth.

At their weekly press conference January 7, 2020, the Change Guyana founders unveiled details of how they would ensure the revenues from oil exports benefit Guyana today and in the future. Following is the text of Robert Badal’s statement. 

Change Guyana’s objective is to ensure a fair share of our oil & gas resources for our people and propel Guyana among the league of progressive countries.

We applaud the success of ExxonMobil and its partners Hess and CNOOC in discovering and bringing this world class resource to production, and encourage their leaders to continue their partnership with the people of Guyana.

Our oil and gas reserves are indeed world class and must be exploited for the benefit of both sides. While we feel that our leaders could have negotiated a better deal for the people of Guyana, the commencement of production has put Guyana on the map and will bring enormous benefits to our people.

As responsible Leaders we want to engage Exxon and its partners and all oil majors to continually enhance the benefits accruing to our country.

Our plans include:

Oil & Gas Resources

  • Negotiating a better deal over time on all existing contracts
  • All blocks for which the investors commitments were not delivered to date would be returned to state ownership
  • These blocks and all unassigned blocks would be vested in a state-owned National Oil company (NOC)
  • Blocks would be auctioned periodically to realize the highest price with attractive signing bonuses
  • Contracts governing these blocks will be royalty based, with the investors subject to our local taxes just like local companies
  • Good governance, transparency and openness would underlie all such arrangements
  • Every citizen of Guyana would be assigned shares in the NOC from birth. Such shares would appreciate in value with every Auction and signing bonus. Sales of these shares may only be disposed of to one’s family or the NOC. This will give every Guyanese a stake in our oil resources and the benefits therefrom.

Management of Oil Revenues

Given that oil resources are finite and will be depleted over time, the management of the revenue therefrom is of utmost importance to ensure sustainable long-term development, economic and otherwise.

Given the history of rampant corruption under the PPP and APNU/PNC, new and adequate controls are vital to prevent misuse, theft, wastage and the discretionary abuse by any Government.

Our revenue management plans are as follows:

  • In year 2020 to 2022 revenues from oil would be used to uplift the income levels of all employed through reduction in income taxes, improvements in health care, education and urgently needed infrastructural works including a bridge across the Demerara River
  • From 2023 the Sovereign Wealth Fund (SWF) will be activated. A portion of the annual income from oil will be appropriated to this fund by parliamentary approval. The balance would be appropriated to specific Funds, an infrastructural development fund, a Healthcare fund, an education fund, an agricultural and industrial development fund.
  • The Minister of Finance will only have access to these specialized funds. Any draw-down from the SWF would require parliamentary approval
  • This would ensure better planning, transparency and accountability, and best safeguard of our people’s interest
  • A special allocation, a Welfare Fund, would be made to finance a safety net for depressed communities, single parents and the more vulnerable in our society

Our focus is development around oil and gas to ensure that after the oil is depleted our economy is strong, resilient and fulfills our promises to future generations.

This means developing world-class infrastructure. The physical infrastructure includes networks of roads, highways and bridges that connect all communities; and ports and airports to maintain affordable and reliable ties globally. It also means telecommunications and digital infrastructure;, healthcare, electricity and water supplies.

It means creating a low-tax destination that attracts large scale investments in agriculture, manufacturing, fisheries and forestry, bauxite, gold and other minerals. It means a highly trained, efficient and independent civil service, independent Central Bank and judiciary.

It means a culture of governance that serves, instead of being served; honest; a system that guarantees and delivers on fundamental rights of freedom that works for all.

That’s the development and the Governance Change Guyana brings.

We will propel Guyana among the league of progressive countries.