As Guyana continues to increase its oil lift at an estimate of one million barrels by the end March 2020, there is much debate on how Guyanese will benefit. The persistent questions being raised, include whether the negotiations with Exxon Mobil brokered a favorable deal for Guyana or if it squandered the patrimony of the Guyanese people to Exxon Mobil, Hess and the other international conglomerates involved in the exploration and eventual oil lift .
The current political climate in the lead up to the General elections on March 2 continues to fuel the debate with conflicting information and claims by the contending political parties. The main opposition groups are advocating what is best represented in an advertisement in the local newspapers that the government is culpable and incompetent for “selling property (oil) without knowing its value.” This view is complemented by a report, Signed Away issued by Global Witness, an International NGO, and published February 7. The Report concludes that by the terms of the negotiation with Exxon Mobil, Guyana stands to lose US$55 Billion over 40 years. In 2011, Global Witness exposed a US$ 1.1B bribe by Shell Limited with respect to Nigeria Oil exploration, implicating that country’s Minister of Natural Resources.
The Guyana Government on the other hand has contested this and other statements as false and misleading. It has launched a publication , GUYANA PUBIC SECTOR LOCAL CONTENT POLICY on February 10, 2020 by the Department of Energy in the office of the President. In essence, local content is recognized to be the sum of input of local goods and services including employment across the oil and gas value chain. It also establishes the benefits that are predicted to accrue for investments of the revenues from oil in education, health, infrastructure etc. It points to the fact that Guyanese suppliers have been sensitized to the available opportunities and that provision is made for Guyanese public awareness of the actual plans for the management of the resources from oil. Allied announcements of significance from the Department of Energy are that :
Subsequently, Exxon explained that royalty is based on participation at no cost to Guyana whereas working interest pays its share of costs to explore and develop the project. According to its statement, Exxon advanced all of Guyana’s share of the cost and Exxon would have borne the entire loss if they did not find oil: “from day 1 , Guyana receives 14.5% of the project cash flow. Then after Exxon recovers the cash it advanced to Guyana, Guyana’s cash flow leaps to 37% more for a total 52 % advantage. The opinions of Open Oil, Global Witness and the IMF are far less positive about the deal. These divergent perspectives require closer investigation, beyond the ability of GOFAD, under the present circumstances requiring the verification of conflicting information.
The National Resource Fund : Transparency and Accountability
However, there are important developments intended to enhance transparency and accountability. First, is the setting up of the Natural Resource Fund (NRF) commonly referred to as a Sovereign Wealth Fund. Second is the establishment of a Public Accountability and oversight Committee (POAC). According the Act, the POAC will comprise 22 members, independent of political affiliation and representing the community interest. It will be responsible for increasing public awareness through disseminating evidenced based information and active public engagement. The POAC will be charged with the responsibility of promoting short, medium and long term priorities for use of the resources from Oil, consistent with the Act establishing the National Resource Fund.
The establishment of the POAC is a recognition that in today’s world, for public policy to be effective, it can no longer be the preserve of state actors or limited to the notion of public-private partnership. Non-state actors – NGOs, civil society, corporations, think tanks, influential personalities, the media, faith-based organizations, youth etc. — play an increasingly influential role in the decision making including the conduct of diplomacy and international relations. It is therefore expedient that they be tapped as supportive advocates. In this regard, the University of Guyana Energy Think Tank (UGETT) is an important initiative to accelerate the working links between Civil Society and academia working in this cutting edge area, critical to Guyana’s sustainable development. UGETT has already been engaged in fostering an understanding of the issues related to the NRF and established in the NDF Act. See https://finance.gov.gy/publications/guyana-natural-resources-fund-bill-2018-2/
The NRF Act specifically refers to compliance and management of the fund with respect to good governance and international best practices, including the Santiago Principles. In this regard the Chilean Sovereign Wealth funds established since 2006 is a commitment transparency. It ensures access by the public to relevant activity through an exclusive website that publishes information on all the fund’s monthly, quarterly and annual reports; and the legislation pertaining to the funds at the recommendation of the Financial Committee in its annual reports. In Guyana’s Fund, the Bank of Guyana is responsible for the operational management of the fund which is authorized to expend one third on development programmes and an untouchable two-thirds to the NRF for the future. But, there are several outstanding elements of the Act still to be fulfilled, no doubt stymied by the pending elections on March 2. They include the actual appointment of members of the PAOC, Budget of the PAOC and renumeration of the members PAOC.
The POAC and Think Tanks such as UGETT therefore play a vital role and can together serve Guyana’s interests best, if, in addition, they focus their discussions on building capacity for monitoring and evaluation, highlight anti-corruption policies, promote lessons learned from the experiences of other oil and gas ventures especially in developed countries that help to avert looming outcomes such as the ‘Dutch Disease’
The Way Forward: Broader Strategic Issues of Sustainable Development
The discussion on the way forward needs to place the objectives of the NRF Act in the broader Guyana's sustainable development in the context of the Caribbean Community. These include:
2/13/2020 03:08:41 pm
It is right and proper that the University of Guyana should both play a prominent role in evaluating and discussing how to maximize the benefit of oil wealth, and should itself benefit from the oil wealth. Education is one of the greatest investments the country can make: a return from that investment is wisdom to manage the investments better in the future.
2/14/2020 07:37:47 am
8/3/2022 05:41:48 am
Very much appreciated. Thank you for this excellent article. Keep posting!
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Edward and Auriol Greene Directors, GOFAD.