The humble fruit vendor selling at Bourda Market understands the difference between price and value. She grasps the value of her golden apples and sweet mangoes. She prices them at or above their fair value. She knows the prices of inferior produce and how far potential customers would have to travel to purchase her quality offerings. Hence, she prices her produce to reflect the premium they are worth. But in Guyana’s case, the price negotiated for our lucrative oil resources would cause the humble vendor to shake her head in disgust.
In terms of extraction cost, we are among the world’s cheapest. Our oil is cheaper to extract than shale oil—even if one excludes the cost of earthquakes caused by fracking. As Hess notes, in its investor material, the Liza field has the lowest break-even cost for global offshore and share resources. We don’t have a high sulfur content like Alberta’s tar sands, which in 2020, will trigger new shipping regulations that will impose taxes on high sulfur content fuel. Our oil is not landlocked and subject to 40% discount to market prices which is the current situation in Alberta. Ours is the top-quality light sweet crude that can be quickly shipped to the refineries in Texas.
More importantly Guyana may become a key producer of high-quality oil that is cheap to extract. Investment analysts have recently started questioning the depletion of Saudi Arabia’s oil fields. Saudi Arabia in its bid to raise funds, using its oil fields as collateral, is starting to reveal the state of those fields. Its crown jewel, Ghawar oil field, has investment analysts concerned. That field may have already passed the half-way point of depletion. Its production has dropped from 5 million barrels/day in 2004 to about 3.6 million barrels/day. Simple demand and supply economics would tell us: The more the Ghawar field depletes the more the price of our oil increases.
The Guyanese people are waking up to the unfair oil contracts where the little we are getting (a miniscule 14.25 barrels out of every 100 barrels) will be clawed back by questionable pre-contract costs and operating expenses we are incapable of verifying.
There are about 500,000 Guyanese living abroad. But our country has enviable attributes for healthy living:
1. In New Delhi people wear face masks to protect themselves from pollution. Our fresh sea breeze is rejuvenating.
2. We can eat a wide variety of fresh fruits and vegetables. In North America, the mangoes and bananas arrive green and then ripen in the stores. Yes, stale food compared to freshly picked.
3. We can eat a wide selection of fish from our oceans and rivers. The Japanese would pay magnitudes more than we do to eat our fresh fish.
We also have some of the most enviable resource deposits in the world from gold to oil. To the outside world, it is incomprehensible given our apparent abundance why 40% of our people would choose to live outside Guyana.
We squander our resource riches – and our country remains undeveloped and poor – while the Guyanese people continue to seek unfriendly shores to survive. Our major political parties have let foreigners raid our gold. But our 6 billion barrels of oil are worth magnitudes more than our raided gold. Thus, this is another chance, and maybe the last one, for the major political parties to stand up for our people. But their current silence on renegotiation of the oil contracts is deafening. Are they acting in the best interest of our people or the oil companies?
We have a few new political parties trying to correct the situation. One political candidate stands out in his call for renegotiation. He is Nigel Hinds. Over the last few years he has written, presented, and walked the streets to protest the oil contracts. We need more Nigel Hindses, that is we need political leaders that would stand up for our people.
We need the oil contracts renegotiated. Turning a blind eye at this pivotal moment in our history is unacceptable. The street vendor’s children and grandchildren should live a significantly better life than her. We have the oil resources to make it happen if we get a Fair Deal Contract that reflects its value. Ask your local candidate if renegotiation is a top priority for their party and why they are not talking about it in the media?
Yours faithfully,
Darshanand Khusial
