The discovery of oil is the biggest opportunity for Guyana to rid itself of poverty and it should take the current petroleum deal with ExxonMobil and not “tear it up” for that will mean the death of an oil industry here, Sir Paul Collier, a British expert said Wednesday evening.
“As far I can see you got a reasonable deal,” Sir Collier, a professor at Oxford University told journalists at the Pegasus hotel in Georgetown.
There have been wide-ranging criticisms of the Petroleum Sharing Agreement between Exxon and its partners and the government of Guyana, with some arguing that the royalty payment is too low and that Guyana should renegotiate for a better deal. The agreement spells out a two percent royalty and a 50/50 profit sharing after production costs are recovered.
“What would be absolutely disastrous is tearing this contract up; if you tear this contract up, nobody else will come,” Sir Collier declared.
He said that he “wouldn’t worry” about the terms of the contract; “you’re going to get quite a lot of money.”
According to Sir Collier, seeking to dump the current agreement with ExxonMobil and its partners would cause the government to lose credibility over the contracts it enters into and if you “tear up” the first agreement within years then “you’re dead.”
He suggested that future agreements could be better than the first one and that Guyana should use the first experience to fashion such better agreements.
Acknowledging that Guyana faced an “unequal” position in negotiating the agreement, he said what the government should concentrate on is building the capacity to scrutinise what the oil companies pay in taxes.
“Don’t assume that you can just trust them to pay the right amount of tax; they don’t,” he declared.
He said the government should have a group of experts focused on oil tax.
Sir Collier would not be dragged into discussing projected oil revenue, saying that’s “fool’s game.”
“You just don’t know what the revenue is going to be; the one thing you really do know is that they’re going to bounce around,” he stated.
He said that picking up best-case scenarios and trying to predict revenues is a “dangerous thing” since the dynamics of a big project like Guyana’s can change, including delays.
Speaking on the fact of Guyana pursuing a petroleum industry and a green state at the same time, he suggested that he saw no irony with this.
“You don’t have to be holier than the Pope. If you just have a green economy onshore, that’s holy enough, and sensible,” he stated.
Speaking about the spending of oil revenues, Sir Collier said that this has to be managed prudently so that spending is done incrementally and on projects that benefit people.
“Some countries use their oil money for things they call investment but all they are is heaps of unfinished concrete that do no good to anyone; the minister gets 20% when they build it and they sign the contract, and that’s what it’s about.
“So, you don’t want that; you want proper investment projects that actually have a good return and transform people’s lives like bringing electricity… giving people an education,” he stated.
He said that the oil find is Guyana’s opportunity to come out of poverty and that it should “take it.”
“Is this big enough to make a decisive difference for your children if you use it well? Yes. This is the biggest, historic opportunity the society has ever faced. I suspect it is the biggest opportunity it will face in any of your lifetimes, so getting it right is really important,” he stated.
