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Read what the International Business Times wrote about us

December 13 2019

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In its Wednesday, December 4 issue, the International Business Times, with the caption, “Guyana on the Brink of Unimaginable Oil Wealth: Is This Small, Poor Country Prepared?” published these words; “But some observers worry that immense riches might not benefit Guyana, a country that has been notoriously corrupt and burdened by high rates of poverty and unemployment.”


I suggest you read this article, because the columnist, Palash Ghosh quotes many foreign experts expressing their concern as to how the money will be spent. The columnist cites Amy Myers Jaffe, the director of the energy security and climate change program at the Council on Foreign Relations, as being skeptical.
Myers noted that; “there is no way the explosion of money will be managed properly.”

The cynicism and skepticism of many other leading experts on global business trends are produced in the article. Obviously, these people have read up on Guyana.They are right. When the anticipated wealth comes, I don’t know if I will still be writing. I don’t know what I will be doing with my life, because I am getting on in age.

Let me be unambiguous in my criticism of the people who currently inhabit the kingdoms of the PPP, PNC and AFC, so when that oil wealth is melted away like butter against the heat, my critiques will be there for researchers to read.
The leaders of these three parties are unfit to administer oil revenues. Their track records are utterly horrible. I am not saying the newcomers in the third parties are morally superior. But I know the ones who had recent power, and those now in power, have shown no patriotic responsibilities in the use of state funds.
From Jagdeo to Granger, we have seen reckless, wanton, ostentatious, insane spending that should cause every citizen over 18 years to reject the PPP, PNC and AFC in 2020.


I read that article in the International Business Times, and if the money it projects is indeed factual, then enormous wealth is coming to this country. Based on those track records from 1999 to 2019, the PPP and APNU+AFC should not be elected to have a parliamentary majority. Wasted money is going to cascade like fountain water.My accusation of morbid financial waste by the current regime is based on UG under Ivelaw Griffith’s leadership – 2016-2019. I have written about this in several columns, and I am repeating it here, and I am sure today will not be the last. The way hundreds of millions of dollars at UG during those years were thrown away on monumental frivolities, and the government’s refusal to act because of political patronage, tells the tragic nature of this country.For men and women in power who saw enduring poverty all over Guyana long before they were successful leaders, not to have acted to curtail reckless, ostentatious spending at UG, is a formidable indictment on their eligibility to rule this land.


The present regime will not survive scrutiny of the morbid expenditure that went on at UG from 2016, but their opponents are not making it a campaign issue. They should, and I hope they do. Here now is a fact that should generate anger in you when the subject of how oil wealth will be used comes up in any kind of conversation.When the unions in their glorious attempts requested a forensic audit of UG, the government rejected it, settling for a mainstream audit, which is different in scope and magnitude from a forensic audit. The ordinary audit was agreed upon. When Griffith came under the microscope at contract renewal time and resigned, the government ended the audit. It was the Auditor General who showed immense courage by asserting his office’s right to continue with the process.


I am repeating what was contained several times in these columns and what I have said on two radio station interviews. Here it is; I honestly believe any PPP government would have intervened and stopped that mismanagement at UG. There was too much funds going upon the rubbish heap for a poor nation like Guyana.I make no apology for this opinion and I will repeat it here for emphasis – no PPP government would have tolerated the insane spending that went on at UG from 2016 -2019.The majority of Guyanese will cringe when they see how the APNU+AFC regime wasted hundreds of millions on form and not substance at UG.

I am not voting for the PPP. But after what I saw at UG, the APNU+AFC coalition is unfit to rule this nation. It should not be in control of our oil wealth, period!

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper)

Guyana On Brink Of Unimaginable Oil Wealth: Is This Poor, Small Country Prepared?

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Ahead of this week’s meeting of the Organization of the Petroleum Exporting Countries in Vienna, the tiny South American nation of Guyana will likely not be on the agenda. However, within a decade this country of just 778,000 people may be as wealthy as all other countries in the oil bloc.

That’s because Guyana is on the verge of receiving a mountain of cash.

In 2015, Exxon-Mobil (XOM) discovered a property offshore Guyana at the Liza-1 well with more than 5.5 billion barrels of confirmed oil and gas reserves. Then, in September 2019 ExxonMobil made an even bigger discovery at the Tripletail-1 well offshore of Guyana – a property with more than 6 billion barrels of oil.

Beginning this month, Guyana is projected to earn $300 million annually from the phase 1 of daily production at Liza – expected to amount to 120,000 barrels of oil per day. Phase 2 at Liza – which is expected to commence in mid-2022 – is expected to produce 220,000 barrels of oil per day.

 

Rystad Energy, an independent energy research and business intelligence company based in Norway, reported Guyana’s oilfields (including the recently discovered Tripletail-1) will exceed 600,000 barrels per day in total production by the end of this decade. These oilfields are expected to generate annual revenue of $15 billion, of which $10 billion would be split by the oil companies and the government.

Some observers say they think Guyana will eventually become as wealthy as the Arab oil states,

“Many people still do not get how big this is," former U.S. Ambassador to Guyana Perry Holloway told a reception in the Guyanese capital of Georgetown. "Come 2025, [gross domestic product] will go up by 300% to 1,000%. This is gigantic. You will be the richest country in the hemisphere and potentially the richest country in the world."

The International Monetary Fund forecasts Guyana will see its economy grow by 86% in 2020 -- up from 4.4% in this year.

“The reason the IMF is projecting that is because Guyana has the highest amount of oil for each individual person of any country in the world,” Natalia Davies Hidalgo, a Latin American analyst, told CNBC.

As a point of comparison Saudi Arabia has about 1,900 barrels of offshore reserves per person, while for Guyana the figure will be 3,900 barrels.

“And it could have more, as production hasn’t even started yet and new discoveries are still being made,” she added.

Ahead of elections scheduled for March 2020, some opposition leaders have called on the government to revise revenue-sharing agreements – which were written decades ago – to secure more favorable terms from oil companies in anticipation of huge profits.

The existing oil contracts call for Guyana to receive a 2% royalty and 50% of profits from oil proceeds – terms described as fair by Luiz Hayum, upstream research senior analyst, Latin America at Wood Mackenzie, a global energy research and consultancy group.

Hayum noted that changing terms of the contracts might dissuade oil companies from further exploration and development.

“They [politicians], however, seem to understand the huge benefit of collecting the oil revenues rather than trying to get more out of them or trying to develop a refining business within Guyana – they understand it’s more important to collect revenues and to invest in development of the country rather than turning into a pure oil economy,” Hayum said.

But some observers worry that immense riches might not benefit Guyana, a country that has been notoriously corrupt and burdened by high rates of poverty and unemployment.

Verisk Maplecroft, a global risk and strategic consulting firm based in Britain, cautioned the main risks of investing in Guyana are political and social: It is a poor country, with underdeveloped infrastructure and subpar government institutions. Moreover, Guyana is racially divided between blacks and Indians while elections often lead to violence and unrest.

Thus, Guyana may not be adequately prepared to manager sudden enormous wealth.

Amy Myers Jaffe, the director of the energy security and climate change program at the Council on Foreign Relations, is skeptical about Guyana. “There is no way the explosion of money will be managed properly,” she said.

Verisk Maplecroft further cautioned that Guyana needs to restructure some of its society.

“The challenge beyond 2020 is for the next government to adhere to and further develop the country’s institutional capacity to manage this wealth, and to implement a balanced economic policy program ensuring equitable development for the entire country, irrespective of ethnic divisions,” it warned.

Hayum said Guyanese government institutions “need to develop to manage the related contracts and this is something we see as not happening as it should.”

David Goldwyn, president of Goldwyn Global Strategies, expects that Guyana will undergo massive changes, but remains concerned.

“Guyana really is a country at risk,” he said. “They’ve gotten lots of advice, they’ve thought about a sovereign wealth fund, they’ve thought about a public accountability board, they’ve thought about a petroleum law — but they haven’t implemented it yet. They’ve got a framework on paper of a system that would provide accountability, but they haven’t implemented it yet.”

Similarly, Valerie Marcel, an associate fellow at think tank Chatham House, told CNBC the Guyanese “haven’t had the experience with this type of windfall, and it is coming so suddenly.”

Guyana, which has suffered a massive brain drain caused by emigration to Britain, the U.S. and Canada, may not have enough qualified local people to run something as complex as an energy industry.

Goldwyn added: “The next five years will be bumpy. The money will not have arrived. The ramp up will be slow. And there will be another political cycle, so whoever is in power now will not be in power when the $5 billion a year check arrives.”

Goldwyn said he hopes Guyana upgrades its infrastructure and school system and successfully manages unimaginable wealth.

Indeed, Guyana only has to look at neighboring Venezuela to see the damage that poorly managed oil wealth can do.

Vincent Adams, the new head of Guyana's Environmental Protection Agency, who also worked at the U.S. Department of Energy, told BBC:  "We've seen the experiences in other countries. They got all this oil wealth and a lot of those countries are now worse off than before oil."

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Offshore Guyana: no longer frontier country?

Source

21 November 2019

New major oil discoveries offshore Guyana have propelled the country from a mere frontier to an oil and gas hot spot. But with elections looming and all eyes focused on the oil prize, what will these new finds mean for Guyana, and how will they be exploited?

In 2000, the U.S. Geological Survey highlighted the huge potential of the Guyana-Suriname Basin. It estimated the region had recoverable reserves of more than 13.6 billion barrels of oil and 32 trillion cubic feet of gas – the second highest resource potential among unexplored oil basins in the world.

Despite these estimations, offshore Guyana remained frontier territory for over a decade. In 2015, ExxonMobil made a major discovery at the Liza-1 well in the offshore Stabroek Block and further drilling confirmed a huge commercial play, comprising 13 oil finds and more than 5.5 billion barrels of confirmed oil and gas reserves.

The discovery thrust Guyana into the headlines. But the country didn’t fully shed its frontier status until September 2019 when ExxonMobil announced another major discovery at Stabroek at the Tripletail-1 well. This new find takes the oil total in the block, which comprises 6.6 million acres, to over six billion barrels.

In the same month, Tullow Oil plc said it had found yet another large oil discovery in the Joe-1 well of the Upper Tertiary oil play, firmly cementing the region as an oil and gas hot spot. Rystad Energy predict the Joe-1 well discovery to hold 40 to 50 million barrels of oil.

No longer frontier country

ExxonMobil’s discoveries shed any doubt of Guyana’s resource potential. But Tullow’s first find is even more important, says Luiz Hayum, upstream research senior analyst, Latin America at Wood Mackenzie.

“Tullow Oil’s discovery is almost more important that Stabroek because it proves there is oil beyond that one block and helps to set up a multi-operator environment in Guyana – this was the bigger news,” he says.

The oil industry is also watching closely to see if Repsol’s ongoing exploration in the offshore Kanuku block bears any finds. Repsol is the operator of the block, which covers 1,937 km2 in the Atlantic Ocean, with Tullow Oil and Total also holding interests.

According to reports, Guyana, which has a population of just under 800,000 people, is expected to earn $300m annually just from the Exxon Liza Phase 1’s daily production of 120,000 barrels of oil.

Production has moved forward from early 2020 to December 2019. Production from the Liza Phase 2 startup is expected in mid-2022 and will develop approximately 600 million barrels of oil a year, 220,000 barrels of oil per day.

Given the recent incredible offshore activity, international focus is now on how Guyana will manage and develop its new-found resource wealth.

Renegotiating contracts

Imminent oil revenue has also been high on politician’s agenda as elections loom in 2020. Some opposition leaders have even suggested renegotiating oil contracts, stating that the government, which lost a no confidence vote in 2018, gave too generous terms to oil companies.

Revenue sharing agreements between the consortium and the government were entered into decades ago when offshore Guyana was a pure frontier.

The terms – a 2% royalty and a 50% profit oil levy – are favourable says Hayum, but reflected the risk profile of the block at the time.

“Exxon got the advantage as the first investor, but future contracts will have a much larger government take on them,” he says.

Rystad Energy state that on average the government take for all offshore projects is around 75%, while rates in major producing countries such as Nigeria, Norway, Mexico, Indonesia and Trinidad are all above 80%.

A new political party, Change Guyana, has vowed to renegotiate all existing contracts with oil companies to get higher royalties if elected and suspend the award of new concessions pending those talks. The leader, Nigel Hinds, said Guyana also “urgently” needs a local content policy for the emerging oil and gas sector.

A change in the ExxonMobil contract, however, could have the impact of stopping future discoveries moving into development and therefore halt revenue generation, which is the main objective to the government, says Hayum.

“They [politicians], however, seem to understand the huge benefit of collecting the oil revenues rather than trying to get more out of them or trying to develop a refining business within Guyana – they understand it’s more important to collect revenues and to invest in development of the country rather than turning into a pure oil economy,” he adds.

Further challenges

According to Sam Benstead of Verisk Maplecroft, the main area of concern for investors in Guyana are ‘above ground risks’, which could dampen an ‘otherwise extremely positive outlook.”

“Guyana is jumping into the deep end…with underdeveloped government institutions, the region’s fourth poorest country will face considerable hurdles to manage the newfound wealth effectively,” he writes.

In 2018, Verisk ranked the government stability as favourable but warned that the upcoming elections create a ‘winner-takes-all situation’ increasing the risk of social unrest and reducing government dependability.

However, it notes, both the main parties support foreign investment and a rise in resource nationalism is unlikely.

But Hayum says poorly run government institutions and lack of infrastructure could present a considerable barrier to development if not addressed soon.

“The government institutions need to develop to manage the related contracts and this is something we see as not happening as it should,” says Hayum.

“Issuing of exploration plans or environmental licences could get bottlenecked, especially because now we have multiple operators in the country.”

The future of offshore oil in Guyana

According to Rysand Energy Guyana’s total oil production is set to surpass 600,000 barrels per day by the end of the next decade. These volumes could generate total annual revenue of $15bn from the oil and gas industry, according to the firm. After all costs are paid, around $10bn of profit could be split between the companies and the government.

And beyond just the numbers there are others positives for the development of Guyana’s oil resources. The oil is light, much so compared to neighbouring Venezuela, and so easy to shift in international markets and there are no major technical challenges to extraction.

But there remains an underlying fear that Guyana could become yet another petrostate that fails to develop its industry for longevity and manage its wealth wisely.

Though the current government has shown signs of taking steps towards mitigating the short and long-term challenges of its newfound oil wealth. It has established a sovereign wealth fund and is joining the EITI.

However, Verisk Maplecroft warns it has a way to go, and the upcoming 2020 elections will be a test of these processes.

“The challenge beyond 2020 is for the next government to adhere to and further develop the country’s institutional capacity to manage this wealth, and to implement a balanced economic policy programme ensuring equitable development for the entire country, irrespective of ethnic divisions,” it notes.

 

Django
Last edited by Django

I agree with this. Whenever I meet a visitor from Guyana and make a passing comment about how they got oil, I am always replied with basically the same retort, "but will we get any"?. It says that people are skeptical that any of the benefit of that oil revenue will benefit them and more worried that the government will just keep it for themselves or squander it. I have to admit that I don't know which political party the people I make the comments to support. I speak freely of my contempt for the PNC but don't intrude on what others' are.

FM

Guyana got a great deal!  It’s now for the Govt to bring it to the people.  That’s not Exxon’s responsibility!

Guyana has to suck some pride and engage other countries in helping to manage the gush of wealth!

FM
ksazma posted:

I agree with this. Whenever I meet a visitor from Guyana and make a passing comment about how they got oil, I am always replied with basically the same retort, "but will we get any"?. It says that people are skeptical that any of the benefit of that oil revenue will benefit them and more worried that the government will just keep it for themselves or squander it. I have to admit that I don't know which political party the people I make the comments to support. I speak freely of my contempt for the PNC but don't intrude on what others' are.

From what I read, both parties have serious plans for infrastructure!  That alone is a major benefit to the people and economy!

There will be corruption however, if they keep a lid on it and develop the country, the people will benefit!

FM

Guyana’s plan to raise future oil royalties comes at the expense of competitiveness, says analyst

Source

By Felix Todd  31 Jul 2019

Guyana announced earlier this month it was planning to raise the royalties it takes from all future oil licences – a move market intelligence firm GlobalData predicts will come at the cost of the country’s competitiveness in the industry.

Its Department of Energy said it is preparing a licensing round for acreage in both shallow and deep water for the third quarter of 2020, and that it expects the country’s take in the royalties to be higher following close examination.

Currently, Exxon Mobil, Total and UK-based Tullow Oil are drilling offshore wells in Guyana, with more than billions barrels of oil having been discovered in the highly promising region.

Alessandro Bacci, upstream oil and gas analyst at GlobalData, said: “If Guyana goes ahead with its plan of increasing the royalties in its production sharing agreements (PSAs), the scope for adjustment will be limited if it wishes to retain its regional competitiveness.

“Under the current contract structure, Guyana may push its royalties up to a 5% rate from the current 2% – beyond that threshold, it may diminish the attractiveness of the country’s petroleum fiscal framework for investors.

“GlobalData assessed the profitability of a Guyanese offshore development at the 2% royalty rate applied to ExxonMobil-operated Stabroek license, and at increased royalty scenarios of 5%, 10%, and 15%.

This assessment shows that raising the royalty rate above 5% could make potential returns under Guyana’s fiscal regime significantly less competitive than under the regimes of regional rivals, such as Brazil and Suriname.”

guyana oil royalties

Credit: GlobalData

Guyana oil royalties

Following Exxon Mobil’s landmark discovery in 2015, which was exploited via the Liza 1 well that drilled 5,433 metres in 1,742 metres of water, Guyana has begun to stake a name for itself as one of the world’s next oil and gas hot spots.

It was then followed by Payara, Liza deep, Snoek, Turbot, Ranger and Pacora by early 2018, but Mr Bacci claims the the fruits gained from these projects will be mitigated if the country’s government continues on its intended course.

“Since the initial negotiations with ExxonMobil, there has been a lot of attention on the royalty rate as if this were the only source of government take,” he explained.

“However, this is a misrepresentation of the PSA structure. The reality is that the PSA model has a 75% cost recovery with the remaining 25% profit oil equally split between the licensees and Guyana.

“The minimum effective royalty rate paid to the government is 14.25% of the gross revenue. For Liza Phase 1 we expect to have a free cash flow for the government higher than 50%.

If Guyana wants to have a royalty rate in line with the average PSA royalty rate across the globe, i.e., between 10% and 15%, it must change the structure of the current PSA so it doesn’t lose competitiveness.

“Alternatively, it might slightly increase the royalty rate while maintaining the current PSA structure or introduce a sliding scale with royalties increasing with profits.

“The current attractive framework attracted major oil companies such as ExxonMobil, Total, Tullow, Hess, Repsol and Anadarko, but, if fiscal changes make the regime less competitive, it could limit future exploration.”

Django

Hey hey hey...except Freddie is part of de prablem...hey hey hey. Anyway...ayoo wait till PPP win and de destablise start. PPP go not juss cut deal wid dem huckster, hustler and pusher class businessman...dem gat lil Putin Big Baddy right next door...hey hey hey...Big Daddy Puppet gat dem drug mercinery gang hustling gold and coke...and dem sending in Essequibo dem gang...ayoo better gat one feet out de door...hey hey hey. Dem one lovers in de PNC/WPA/AFC na innocent hay too...hey hey hey. 

FM

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