Oil resources will put Guyana on path of “high-end development” – Finance Minister

As Guyana prepares for production of oil in 2020, there has been much debate about whether the country struck a good enough deal with US oil giant ExxonMobil and what could have been done to secure a better deal, given the enormity of the oil find in this South American country.
The question in relation to whether Guyana secured a good or bad deal was avoided by Senior Finance Minister Winston Jordan on Monday, when he was asked the question at a press conference. He said while the deal has already been made, Guyana still has a chance to experience real growth.

“We can discuss this over and over, but I believe the positive that you can take away is that we now have resources coming to Guyana that can finally put Guyana on the path to sustained high-end development, where two per cent and three per cent can become things of the past.”
The Minister noted however, that it also depends on how well the country uses these resources, lamenting that it is a complete waste of time to argue whether or not Guyana may have received a good or bad deal. He said that what is now important is for Guyanese to look to the future with hope for development.
Jordan stated clearly, “It is not for me to be happy or unhappy.” However, he said Cabinet has the ultimate and collective responsibility to approve documents and the ExxonMobil contract was discussed and a determination was made as to what percentage of profits Government should get.
The Minister pointed out that the coalition Government did not have full control over what kind of deal Guyana secured, because the previous People’s Progressive Party/Civic Government were the ones who initially negotiated the contract with ExxonMobil and accepted a one per cent royalty fee.
“With all this issue about good deal and so on, you are making an assumption that we renegotiated the contract. That contract was already in place; we inherited that contract,” Jordan affirmed.
Asked whether he thinks it was a badly negotiated deal, Jordan deflected from the question and was quick to point out that the then Government may have negotiated based on what was available to them then. “At the time when this deal was put together by the last Government, you have to ask what cards did we hold. Did we know anything was under there?” he further questioned.
Guyana is poised to make huge profits from the oil industry, with the country projected to produce an estimated 100,000 barrels of oil per day. Annual profits, based on an average price of US$50 per barrel, could reach some G$45 billion annually, Guyanese financial analyst, Sasenarine Singh has said.
Singh said this figure was based on his assessment of the recent International Monetary Fund (IMF) report on Guyana, which stated that the revenue-sharing agreement sets the Government’s share at 50 per cent of “profit oil”.
The IMF has further stated that 75 per cent of total oil revenues will initially be allocated for cost recovery, and the Government’s share will be 12.5 per cent. Singh said based on his understanding of how the oil recovery mechanism would work, this can be the status quo for approximately 10 years.
The IMF has however warned the country against any excessive borrowing or an exorbitant increase in public spending ahead of the signalled start of commercial production in 2020 by ExxonMobil and its partners offshore Guyana in the Stabroek bloc.
The international body welcomed the authorities’ plans to establish a comprehensive framework for managing oil wealth, and stressed the importance of having a transparent and rules based framework in place before oil production starts.
Exxon’s oil find in Guyana has attracted international attention, with a number of seminars being held over time. In addition, assistance is being provided by the IMF to boost Guyana’s administrative capacity to handle the expected inflow of revenue.