Hold off on Yellowtail, get your act together – OGGN tells Govt.
Pull Quote: “…there are some serious flaws in the government’s arguments which raise the question about whether the government is acting on behalf of the oil companies instead of the people of Guyana,” Oil Governance Network
Kaieteur News – The Guyana Government is clearly overwhelmed by the number of oil-related activities it is engaged in and according to Darshanand Khusial, of the Guyana Oil and Gas Governance Network (OGGN): “if you find yourself in a hole, the first thing to do is to stop digging”
He made this suggestion in reference to the rush to approve the ExxonMobil-led fourth oilfield development in the Stabroek Block—Yellowtail. “The oil companies will exploit this disorganised approach by the government for the benefit of their shareholders.”
To this end, Khusial observed that government seems to be in a rush to approve Yellowtail and suggested “we should question why the rush.”
The OGGN spokesperson in a recent public missive in questioning the government’s rationale with regard its approach to the Yellow Tail project observed that “instead of being concerned that a major oil spill can bankrupt Guyana, the government is concerned about the supposedly US$22 billion Exxon loss, due to the pandemic that hit in March 2020.” This much was illustrated over the weekend, in a public report which OGGN observed that government released an article stating that the Stabroek Oil Block is not up for renegotiation and cited a number of reasons for its position, including the sanctity of contract, the stability clause and because Exxon lost US$22 billion last year.“The article reads like a marketing campaign for why Guyana should approve the Yellowtail project given the risks faced by Exxon and its partners.” To this end, Khusial said “there are some serious flaws in the government’s arguments which raise the question about whether the government is acting on behalf of the oil companies instead of the people of Guyana.”
Qualifying the governance network’s position, Khusial noted that the administration in its defence of the oil major “didn’t state that Exxon paid out US$14.9 billion in dividends to its shareholders in 2020.”
Pointing to the anomaly that a company that supposedly lost US$22 billion in 2020 still paid $14.9B in dividends, Khusial said “this quirk can be explained by temporary actions required by accounting rules.”
He explained saying: “in 2020, Exxon was forced to mark down about US$19.3 billion in natural gas reserves because the price of natural gas fell in 2020. But recently natural gas prices have been hitting multiyear records – substantially reversing the temporary markdown. Hence, the US$22 billion lost was not a cash loss (it is called a paper loss); that explains why Exxon could still justify paying out US$14.9 billion to its shareholders.”
According to the OGGN spokesperson, “if Exxon had a US$22 billion cash loss, then its shareholders would have fired management for leveraging the company too much by paying out US$14.9 billion in cash dividends.” To this end, he suggested the Government of Guyana is too busy defending a bad deal than spending time to consider these facts.
This in addition to flip-flopping positions, on whether or not the contracts with the oil majors would be negotiated.
Compounding the situation he suggested that government seems to be in a rush to approve Yellowtail and said “we should question why the rush.” He noted that the now more than US$600M derived from oil still sits untouched while the Corona virus ravages its citizens and floods destroy farmers’ crops. “It has not even answered the many questions posed during the EPA (Environmental Protection Agency) session on the gas-to-shore project, but it rushed to have EPA sessions for Yellowtail.” According to Khusial, “many questions raised to the EPA about Yellowtail remain unanswered” and “the government has not yet released the US$460 million pre-contract audit and has failed in its duty to audit US$9.5 billion for Liza 1 and Liza 2.”
To this end, he suggests “it appears the government is overwhelmed by the number of oil-related activities it is engaged in. If you find yourself in a hole, the first thing to do is to stop digging.” This since, “oil companies will exploit this disorganized approach by the government for the benefit of their shareholders.”