Partnership with oil companies based on mutual benefit is Guyana’s best approach

Dear Editor,
On 21st April 2020, the price of oil went negative for the first time in history. When oil prices are negative, it means traders holding oil futures are paying buyers to take it off their hands, or risk having to take physical delivery of the oil, which most are incapable of doing.

This should have a strident alarm for those who think Guyana’s future is all about ‘oil money’, and it is all about how much money we can squeeze from the producer’s abundant profits.
Oil prices have rebounded to where it is once again profitable to produce and sell, but listening to criticism of the decision to review the Payara development, it is obvious that the dreams of an ‘oil economy’ have not dissipated, but have indeed grown to be a bigger pie-in-the-sky than before.

It is time for Guyanese to take a reality check. The Granger Administration spent more than US$6 billion in its five-year term; Guyana will earn approximately US$240 million in 2020. At that rate of return, it would take us twenty-five years to fill the hole left in the treasury.

Oil, at the current production rate, will not bring the development hyped, and therefore expected by the populace. It is imperative that the operator increases oil production from 120,000 BPD to the projected 750,000 BPD for Guyanese to benefit in a significant way, and any review must be based primarily on getting the best possible deal (share of profits/royalties/local content).

I have seen one commentator incredulously arguing for a ‘rocket scientist’ to be added to the Payara review team, and others promoting the view that such a review should take years and examine how many grains of sand would be shifted per annum 120 miles from our coastline in deep ocean. I hold the view that our focus should be to ensure minimal environmental impact and maximum economic return for Guyana.
The review is headed by two eminent Canadian Queen’s Counsel with strong regulatory legislation experience, and the team can certainly find any deficiencies in the project and maximise our monetary inflow.

Editor, we all learned harsh lessons about the oil industry earlier this year; The New York Times wrote: “Even before the collapse of crude prices in March/April, Exxon had been forced to write off billions of dollars of investment in Canadian oil sands and sell assets in the North Sea in part to pay investor dividends” (18.03.20).

In its 2020 Investor Information package (updated 7th April) ExxonMobil lays out the challenges it faces to remain profitable, and emphasises ‘balancing capital allocation priorities and value’. Guyana has to balance our need for our resources to be developed and our desire for maximum returns. Oil is a goose laying golden eggs for all; greed on either partner’s part can kill it. A partnership with the oil companies based on mutual benefits is Guyana’s best approach, and the review is an excellent start.

Respectfully,
Robin Singh