ExxonMobil’s donations to support COVID-19 programmes in Guyana appear to be the first donation of its kind outside America. The oil major has operations in more populous countries like Brazil (210 million people) and Mozambique (30 million people) but has not made any public announcements of donations to those countries. Yes, it signals our oil matters to the future of Exxon.
On Good Friday (April 10th), Stabroek News published my letter titled, `Exxon has bet its future on Guyana but has turned a blind eye in the time of our greatest need’. It is welcome news, a few weeks late, that the oil companies are helping Guyanese battle this virus. We must thank Exxon for their donations of food and personal protection equipment.
The GYD$60 million (about US$285,000 dollars), in donation from Exxon and its partners sounds like a large number. However, it pales in comparison to the US$3.7 billion in dividends Exxon will pay to its shareholders in June (see Exxon’s press release of April 29th, same day as its announced the donation to the Guyanese people). The donation as a percentage share of the quarterly dividend is 0.008%, immaterial to even record in Exxon’s public financial statements!
Oil producing countries are cutting back on production. The latest announcement coming from Norway, it intends to cut production by 13%. We should pay attention when a rich country that is not part of the OPEC cartel, an organization that seeks to control the price of oil, decides to cut its production. It highlights how dire the oversupply of oil has become for oil producing nations. In contrast, Guyana is expected to ramp up, in May, to the maximum daily production of 120,000 barrels.
It is puzzling why we don’t call for a similar percentage cut in our production as Norway and then resume maximum production when oil prices recover. The world biggest oil producers cannot sustain the recent lows, below US$20/barrel, for Brent crude. The reason why Russia and Saudi Arabia had to quickly compromise on their oil production dispute is because they need prices closer to US$80/barrel to sustain their economies. Otherwise, they risk uprisings which can topple their governments. If we reduce our oil production, we will save ourselves significantly more than the US$285,000 dollars in donation we are receiving from the oil companies.
To avoid any conflict of interest, when we can, which may be in a few years, we should reimburse the oil companies for their donations. In social psychology, reciprocity is a powerful force, it compels the recipient of a favour to return the favour. But the benefit to the donor may be in magnitudes more than what was originally given. There are billions of US dollars at stake in renegotiation of the oil contracts. We should not be swayed in our calling for a fair contract by a few hundred thousand US dollars of donations.
Yours faithfully,
Darshanand Khusial
