September 21, 2022
Dear Editor,
In a SN article dated 8/15/2022 and captioned, ‘Guyana set to receive 12 lifts of profit oil for 2022 – Ministry’, it is reported ‘…that the expected total production of oil in 2022 is 93.6 million barrels of oil… (from which) …Guyana will get an estimated 12 lifts of one million barrels each, according to the Ministry of Natural Resources.’.
This distribution of the oil between Guyana and EEPGL is a constant reminder of the inequity that Guyana is experiencing. These twelve lifts at one million barrels each will yield 12 million barrels for the year, with the largest share collected by EEPGL of 81.6 million barrels of oil; and being captured at a rate of approximately 7 barrels of oil for EEPGL to one barrel of oil for Guyana
(Table 1).
This approximate seven to one ratio that Guyana suffers is not the final distribution of oil between the two parties because Guyana has to pay from its 12 million barrels of oil, the cost for the following items: the loss of the 2 percent royalty (SN Article 9-18-2022) ; the cost for environmental insurance and oil spills; the cost related to no ring-fencing; taxes due for fake receipts; the loss of fishermen income due to smaller landed catches; and the loss of the price differential between a medium to light sweet oil called Liza and an even lighter grade called Unity Gold (KN Article, 9, 09, 2022) .
The total cost for these additional expenses that Guyana must pay will reduce Guyana’s share significantly from 12.8% of total production; and this will further penalize Guyana. In fact, if we, the owner of the resource, already feel that we are being robbed at 7 to 1; the case will become much worse when these other costs are subtracted from the 12 million barrels that we receive. Consequently, EEPGL has done an excellent job of maximizing shareholder earnings from the 83.6 million barrels they will receive, given that we will struggle to reject any expenses EEPGL submits; and, therefore, Guyana’s share will be miniscule.
Meanwhile, it was reported that ‘… the 2016 PSA, shared between EEPGL and its partners will remain unchanged, while maintaining “sanctity” of the contract until the end of the agreement’s life cycle. (Additionally, it was confirmed) …that no renegotiation will occur until 2036.’(KN 9-19-2022).
Given this noninterference by Guyana; and in light of the fact that EEPG will be accelerating the extraction of Guyana’s oil by introducing several new floating production storage and offloading (FPSO) ships, it is conceivable that come 2036, EEPGL will be ready to shut-shop and leave, as all the commercially viable oil would have been extracted and Guyana will have nothing to get. We have seen similar behaviour in the extraction of other non-renewable resources when the impending tax payment date is imminent.
I would therefore contend that adding new FPSOs was probably not in the originally contract; and it is on this premise that a renegotiation can be introduced, for more FPSOs will enhance production and reduce the economic life of the Stabroek Block. Consequently, I would further contend that unless action is taken to allow Guyana to get an equitable share of its patrimony, one can only think of the Mighty Sparrow’s song in which I have modified a few lines for context and alignment: ‘Can you imagine how they planning to dig out (we)… liver’ … (and), not a police in the area! … (E)very man in the gang had a white-handle razor… Ten to one is murder!
So wake-up Guyana, for a hole in the ground and crumbs in the bank represent perpetual damage that future generations will forever bemoan the loss of our non-renewable resources and inter-generational wealth.
Sincerely,
Dr. C. Kenrick Hunte
Professor and Former Ambassador
