By Neil Marks
Strict rules should be established now to ensure that Guyana’s oil revenues are spent to transform the country and kept away from meddling politicians, Presidential Advisor on Petroleum, Dr Jan Mangal has said.
Dr Mangal has found himself at the centre of a controversy with the President and his Government over his comments regarding the petroleum contract signed with ExxonMobil and its partners to develop the mammoth oilfields offshore Guyana.
“You don’t know who is going to be elected in the next elections, so this is the opportunity now to set up the most robust systems that are more robust against meddling by politicians,” Dr Mangal told a University of Guyana forum Wednesday, February 07, 2018.
“So let’s set us set up strong systems now where we remove too much decision making by politicians…,” Dr Mangal added.
The expert said he made the same suggestion to Cabinet in March last year, “trying to steer them or convince them… that we have to get it right now.”
But while Dr Mangal said there should be prudent spending, he insisted that there should not be a hold up in any spending, and in fact suggested that it would be wise for the Government to go ahead and borrow money to undertake critical projects in areas such as public infrastructure, health and education.
“it’s like money in the bank; because oil is in the ground, Guyana can go out there and borrow prudently to do critical projects.
“…so we probably shouldn’t put off spending, but we should start spending…,” Dr Mangal stated.
In March 2020, ExxonMobil and its production partners are expected to begin bringing up oil – an estimated 120, 000 barrels per day – from 17 wells offshore Guyana.
The first phase of the so-called Liza-1 development will run for an estimated 20 years; at the end of it, Guyana’s revenues could amount to some US$7 billion.
According to the petroleum agreement, the company will pay US$1 million in an annual fee and will provide US$300,000 for training and US$300,000 for corporate social responsibility projects.
Minister of Natural Resources, Raphael Trotman told the National Assembly in December that the 2% royalty will give Guyana US$380 million per annum. US$18 million has already been paid to the government as a signing bonus.
The revenue was calculated and suggested by ExxonMobil based on a crude forecast by the International Monetary Fund of US$50 per barrel and considers royalties and Guyana’s half of profits after production cost is recovered.
As the floating production storage and offloading (FPSO) unit for Liza-1 is being built, the environmental approval process for Liza-2 is currently being carried out and that phase is estimated to produce 220, 000 barrels per day by 2022.
Dr Mangal said that the two percent royalty Guyana will receive, and the tax regime agreed to, are below international practice.
He has also called for the need for greater diversity in the award of petroleum exploration licence, with ExxonMobil, he said already given 50% of available blocks.
Media reports on his statements drew a strong reaction from Government Wednesday.
“The Ministry of the Presidency puts on record that Dr Jan Mangal, Presidential Advisor on Petroleum, is not authorised to speak on behalf of His Excellency, President David Granger or the Government of Guyana,” the Ministry of the Presidency stated.
Then on Thursday, Minister of State Joseph Harmon added to this, saying Dr Mangal’s advice should not be assumed to mean he can direct or give directions to the President.
If that was not enough, the President issued another statement Thursday evening, saying: “Government Policy is not decided by the Advisor. The Advisor advises me and any decision on policy will come out of the Cabinet,” the Head of State was quoted as saying.”
Harmon, who was speaking at his weekly post-Cabinet press briefing would not be dragged into a question of whether Dr Mangal’s contract could be in jeopardy.
ExxonMobil holds 45% interest in the Stabroek oil block, which is located some 100 miles offshore Guyana and measures 6.6 million acres. Other partners are Hess (30%) and CNOOOC Nexen (25%).
