Head of UG's School of Business not sanguine about 'up front' cash from oil and gas industry
“While the front-loading of contracts and the securing of large contracts might be politically popular it might prove to be economically disastrous, University of Guyana Business Professor Leyland Lucas has said in an article that seeks, in part, to respond to the popular argument touting the virtue of so-called front-loading, that is, the drawing down of significant cash amounts of as yet unearned income from the oil and gas industry.
Lucas, who is serving as Visiting Professor at UG’s School of Entrepreneurship and Business Innovation (SEBI) says in his article that there could be pitfalls associated with the popular “up-front” or front-loading argument that has been steadily gaining traction among ordinary Guyanese.
While alluding to what he says is “an interesting argument to the effect that Guyana would be better off “receiving a sizeable bonus rather than waiting for later disbursements through royalties”, Professor Lucas argues that such an option is not without its potential dangers and pitfalls. He argues that while the “numbers” being touted in the front-loading argument “vary from the well-reasoned to the pie-in-the-sky estimates,” there is need to examine the domestic realities.
“We are a nation with various needs from education to infrastructure. To address those needs we will require a significant influx of financial resources…..however, if that influx is not regulated it will cause inflationary pressures” which pressures, he argues, will not only precipitate “massive inflationary pressures” that are likely to further damage the country’s economy but lead to a further decline in living standards.
Whilst the announcement by Exxon Mobil of the discovery of oil, offshore Guyana, just under three years ago has triggered expectations of a swift and miraculous economic transformation amongst the uninitiated Lucas cautioned that a massive influx of cash does not speedily correct the errors of previous decades. “Engineers, scientists, agricultural experts and doctors are not created overnight. It takes years of training to acquire these skills. If the nation is to acquire these skills then it must be done over time.”
An alluding to the volatility of the global oil market, Professor Lucas raised the question as to where the resources will come from “when an engineer needs specialized training in five years but the bottom has fallen out of the oil sector.”
And in concluding his position on front-loading Professor Lucas contended that “a massive unregulated inflow of cash through a significant bonus may entice policy makers to undertake massive investment projects which the economy cannot embrace with its limited skills inventory. Instead, a gradual inflow of expenditure might prove more beneficial to the nation in the long run.”
In his article the Guyanese academic also weighs in on the subject of the controversy that has arisen over the Exxon Mobil contract including the call in some quarters for a re-negotiation of the agreement. Lucas argues that the controversy associated with the current contract cannot ignore the fact that a contract previously existed. How do we renegotiate this contract?…Moves and counter-moves will only make sense if one party has something that is vital to the other and can force the latter to respond to the actions of the former. In this case we have a product that the world wants but does not need. Any moves by our negotiators can be easily ignored. Consequently, it makes no sense to renegotiate a contract from a position of weakness…We do not own the wells, we do not have the skills necessary to exploit them and we do not have the technology to provide the value-added products. In fact, truth be told, at this stage we are struggling to meet Local Content requirements. One cannot renegotiate a contract from a position of future possibilities, but must do so within the current context. So any conversations of renegotiation will take place from a position of weakness rather than one of strength,” Lucas declared.
The Oil Contract Debate
By Dr Leyland M. Lucas
In the late 1990s, Guyana signed an Oil and Gas exploration agreement with Exxon’s subsidiary, EEPGL. That agreement not only permitted significant activity by Exxon, but also provided Guyana with a small subsumed royalty of no more than 1%. The agreement was also in clear contravention of Guyana’s laws, which stipulated the number of blocks that could be offered to a single entity. Though there were clear violations in law, Guyana has chosen to honour that obligation rather than raise it in other forums or attempt to invalidate it. As a nation, our word has been our bond.
Fast forward to our current situation where we find much being discussed regarding the current contract, and whether or not the nation’s best interests have been considered. In fact, in the past few months, we have been privy to an ongoing debate around the contracts signed by the Government of Guyana and Exxon. This debate has gotten so intense that some have even questioned the integrity and negotiating ability of governments in other developing countries, where the exploration of oil and gas is ongoing. Yes, in the case of Guyana, there is a great deal of evidence to suggest that better could have been done. But, who are we to question the outcome, when we were absent from the process? As my grandmother would often say when a family member chose to criticize others ‘make sure that your house is clean before telling someone else that theirs is dirty.’
In an earlier article on local content, I made the point that oil is no longer a critical commodity. There is an abundance of oil in the global market, prices are highly volatile, and the world has begun a gradual process of shifting from fossil fuels to renewable sources of energy. These are realities that cannot be ignored. For example, within our hemisphere, we see significant declines in oil and gas production, yet very little evidence of a major impact in the global marketplace. Likewise, the Kingdom of Saudi Arabia, a major oil producer with one-fifths of the world’s reserves, has also begun the process of delinking its economy from oil-dependency and looking for newer ways to stimulate growth and development. The Kingdom of Saudi Arabia has determined that, given the volatile prices, oil revenue can no longer be the foundation of economic development. Instead, the Kingdom has shifted towards renewable energy sources and undertaken significant activities towards transforming the foundation upon which the future economy will stand. Guyana, as a country, has also committed itself to a policy of sustainable development and, in so doing, must balance issues of production and protection. Afterall, we exist in a very fragile ecosystem.
Having made these observations, I’d like to proceed with a small contribution to this debate. As one of my former bosses, Mr. Clarence Ellis, would say ‘no matter what the situation, if you are seen to be truthful, reliable, and honest in your dealings, people will work with you.’ Therefore, my contribution to this debate for the most part will center on the words reputation and position. These words should be at the heart of any conversation about contracts and the subject of renegotiation. I hope that the importance of these words will be reflected and help to either advance or bring some closure to the debate.
The Oil Contract
To some extent, what we are dealing with here is a Prisoner’s Dilemma. In a simple tit-for-tat version, players attempt to match/better one another’s moves, with the hope that the victor will emerge with the Lion’s share. However, research has shown that such strategies seldom succeed. Eventually, parties come to recognize that continuous moves and countermoves are less productive, and that mutual cooperation works best. In essence, let’s find a middle ground rather than try to be the ultimate winner. This is an important point in the ongoing debate around the Exxon contract, because continuous negotiations and renegotiations will yield no fruitful results. Hence, the situation becomes one of finding an acceptable position of compromise, from which both parties can gain some benefit and continue to operate with mutual respect.
As we focus on the current contract, one cannot ignore the fact that a contract previously existed. How do we renegotiate this contract? Within a Prisoner’s Dilemma framework, moves and countermoves will only make sense if one party has something that is vital to the other and can force the latter to respond to the actions of the former. In this case, we have a product that the world wants but does not need. Any moves by our negotiators could be easily ignored. Consequently, it makes no sense to engage in efforts to renegotiate a contract from a position of weakness.
Moves and countermoves also influence one’s position. Subsequent moves by a party only makes sense if this is being done from a position of relative strength. Hence, I pose the question ‘What is our strength?’ The simple answer to this question is nothing. We do not own the wells, we do not have the skills necessary to exploit them, and we do not have the technology to provide the value-added products. In fact, truth be told, at this stage we are struggling to meet Local Content requirements. One cannot renegotiate a contract from a position of future possibilities, but must do so within the current context. So, any conversations of renegotiation will take place from a position of weakness rather than one of strength.
This brings us to the issue of reputation. What does it say about a country that signs an agreement and then seeks to change it? Over time, governments and countries develop reputations as either reliable or unreliable bargaining partners. Each reputation comes with costs and benefits. If Guyana develops a reputation for being an unreliable partner, then all options for future development are lost. As a nation and as a government, we must realize that our word is our bond. If we cannot be relied upon to honour our obligations, then there is no place in the world of nations for us.
Recently, some have suggested to me that we can do this on our own. As I listened to these suggestions, I sensed subtle tones of nationalism and nationalization. While such suggestions are laudable, one must admit ‘that boat has sailed.’ Guyana and the rest of the developing world are full of examples of the consequences of nationalization, in the absence of an appropriate skill set. While it served its political purpose, the benefits of so doing left much to be desired. Oil, like sugar and bauxite, are primary products with volatile prices and much of the value-added downstream.
One of the issues that has been raised in this oil contract debate surrounds the product quality. Yes, there is a great deal of literature that suggests the crude is of an exceptionally high quality. Like an exceptionally well-tailored suit, superior quality commands a high price, provided that a market exists. Hence, one must ask the question ‘can quality command a high price in a saturated market?’ The simple answer to this question is no. As we know, primary product prices fluctuate quite significantly. So, a high price today might hit rock bottom tomorrow. For those of us old enough to recall, Guyana sold its sugar at a high price on the world market in the 1970s rather than honour its obligations to existing contracts. Not too long after, the bottom fell out of the world market. As a nation, we were profitable in the short-term, but suffered in the long-term, particularly with respect to our reputation.
Moreover, the wells are not owned by the Government of Guyana. They are owned by Exxon and its partners. How do we exact additional tribute from these companies simply because we have a product of exceptional quality, when the owner opts to not sell it? Guyana cannot force Exxon and its partners to pay a higher premium when they can choose to not pump oil and gas from the wells. Not doing so provides the government and people of Guyana with zero revenue. Hence the need to be cautious in one’s approach to renegotiating of contracts.
Placing this issue of quality into the Prisoner’s Dilemma framework, how do two players arrive at a mutually beneficial position, when one player ceases to participate? More specifically, how does one arrive at mutually beneficial positions when the dominant player withdraws? The fact is, under these circumstances, the game ends and there are no winners. It’s like that childhood experience where the owner of the ball runs home with it because he is unhappy with some decision. What we have left is a group of disgruntled children who grumble and look for something else to do. Unfortunately, Guyana has very few options and even fewer resources that can be summoned into action.
An interesting argument has recently been raised that Guyana would be better off receiving a sizeable up-front bonus, rather than waiting for later disbursements through royalties. While those numbers vary from the well-reasoned to the pie-in-the-sky estimates, one needs to look at the domestic reality. We are a nation with various needs from education to infrastructure. To address those needs, we will require a significant influx of financial resources. However, if that influx is not regulated, it will cause significant inflationary pressures. Such pressures will further damage the economy and leads to a significant decline in living standards. With a massive influx of cash, one does not speedily correct the errors of the previous decades. Engineers, scientists, agricultural experts, and doctors are not created overnight. It takes years of training to acquire these skills. If the nation is to acquire these skills, then it must be done over time. Let’s not forget that we are dealing with a product whose price is highly volatile. Where will the resources come from when an engineer needs specialized training in 5 years, but the bottom has fallen out of the oil sector? Yes, this may happen anyway. But, at least we would not recreate the conditions for another massive brain drain, as was experienced in the 1980s when resources for scholarship recipients were scarce.
Let me use a simple example to further elaborate on this point. Think of someone in the desert with no food or water for an extended period of time. He/she is rescued and immediately placed in front of a large quantity of food and drink. If that person consumes everything without control, then he/she dies. How-ever, if he/she consumes in moderation, until the body is once more accustomed to consuming solids etc, then there is a greater likelihood of survival. The point I am making here is that a massive unregulated inflow of cash through a significant bonus may entice policymakers to undertake massive investment projects, which the economy cannot embrace with its limited skills inventory. Instead, a gradual inflow and expenditure might prove more beneficial to the nation in the long-run. So, while front-loading of contracts and securing large bonuses might be politically popular, it may prove to be economically disastrous.
In some circles, it has been suggested that Guyana deserves a larger bonus because of its contribution to Exxon’s bottom line. At least one commentator has made the point that, since the discovery of oil and gas deposits off the shores of Guyana, Exxon’s book value has increased significantly. In my humble opinion, to use book value as a basis for renegotiating a contract is not a sound position. Book values change on a daily basis. In fact, Exxon’s stock price like so many others in the market has been on a rollercoaster ride. One year ago, its common stock price was $82.83; today, it is $76.27; last month, the stock price reached a high of $89.07. Which stock price should we use as the basis for asserting book value and renegotiating this contract? Should both parties make offers and counteroffers? Following a pattern within a Prisoner’s Dilemma game, such uncertainty cannot be tolerated. Instead of embracing such uncertainty, both players will be forced to arrive at a mutually beneficial point. Moreover, how reliable a negotiating partner is a government when its position appears to change with every market fluctuation? Clearly, other nations and firms will not take us seriously, since stability is essential to the capitalist system of trade and exchange.
Over the past decade, commentators have noted a change in global relations. That change has seen a decline in nation states and the rise of the corporate state. That corporate state takes the form of transnational corporations, which have been able to influence global politics through their actions. For instance, in the US, we see massive amounts of money being poured into political campaigns by individuals and companies such as the Koch Brothers, George Soros, and the professionals on K Street. Why is this important within the Guyana context? The emergence of corporate states is important because they have the ability to alter things within a nation and change the balance of power. As stated by former British Prime Minister Lord Palmerston, and later expressed by Henry Kissinger, ‘friends and enemies are not permanent, but interests are.’ In this case, the interests are Oil and Gas.
Understanding the permanence of interests is important within the context we are examining. Although there may seem to be a disagreement between Venezuela and the US, any perceived reluctance on our part to abide by negotiated agreements could significantly alter the regional balance. If Exxon or any other transnational deems it favourable to reengage with the Venezuelan government, then they will do so. A reliable bargaining partner is always better than an unreliable one. Who then will take up the mantle on our behalf if Venezuela flexes its military might against us? Are we to expect support from the US administration when we have acted against the interests of an American corporate giant? I think that an examination of history would reveal that the answers to these questions are not favorable.
Oil and gas have been found and they have the potential to offer a great deal of wealth to our beloved Guyana, if appropriately managed. This is already reflected in the International Monetary Fund (IMF) reports suggesting a change in our economic classification. Although we may argue about the royalty and signing bonus, it is merely an exercise in futility. We are in a Prisoner’s Dilemma, having originally negotiated a very bad deal. As a bargaining partner, one does not change the rules of the game unless one comes from a position of strength. Unfortunately, such strength does not exist in our case. We have a product that the world wants, but does not need; We lack the skills base and infrastructure to pursue this venture on our own; There is a global shift away from oil and gas towards renewable and sustainable sources of energy. As such, we are approaching all such negotiations from a position of relative weakness rather than strength.
As a nation, there is an expectation that we will honor our word. Our word is our bond and, as such, we must strive to establish and maintain a good reputation. Even within a Prisoner’s Dilemma framework, some reliability is expected. If a move is made, that player is expected to honour the consequences of that move, rather than default. When countries default on their obligations, their ability to reengage with other parties is seriously hampered. Particularly as a small and young country, we must strive to uphold a positive reputation, irrespective of the consequences. Good reputations are hard to come by, can be easily lost, and extremely difficult to regain. Let us focus on playing the hand we have been dealt, rather than continually questioning its validity. Maybe, for future generations, there is a lesson to be drawn from this experience. A nation should always focus on establishing high educational standards and building its skills base, lest it be found wanting.
Article adapted from: https://www.stabroeknews.com/2018/business/03/23/the-oil-contract-debate/
Bigger investments in Guyana highest learning institution needed - VC
The University of Guyana (UG) is appealing for bigger investments in order to effectively ‘prepare thousands of Guyanese’ for the country’s emerging Oil and Gas (O&G) sector.
So says the institution’s Vice Chancellor, Professor Ivelaw Griffith, who this past week lamented the state of affairs, as he appealed to the corporate community, including oil companies, civil society and government for increased investments in the tertiary institution.
“I want to recommend that you embrace the proposition that we have a University of Guyana that we are going to have to invest in appropriately; we being the society, we being the partners at the international level, who think, who are convinced that this is a worthy journey on which to enjoin,” Professor Griffith said.
The University Administrator was at the time addressing the Guyana International Petroleum Exhibition and Summit (GIPEX) held at the Marriott Hotel from February 7 to 9.
He was speaking to the institution’s preparations, in order to meet the projected skills demand as a result of the emerging industry and was adamant the University is not going to be able to “make the efforts and have the outcomes (desired), if we don’t want to invest.”
Investment, he proffered, “needs to come from the government of Guyana, it needs to come from the industry partners, it needs to come from the citizenry.”
Energy Investment Plan
He told the industry executives, delegates and government representatives at GIPEX 2018, “in context of (UG) just sitting there, we got to figure out what the investment will be to make these all happen.”
The University currently has a team working on putting together an energy investment plan and a number of industry partners have already begun collaborating with the University, he said.
Professor Griffith identified Schlumberger, Haliburton, BakerHughes (a GE Company), ExxonMobil, and TechnipFMC – having already employed 10 University Graduates.
The University Vice Chancellor disclosed too that TechnipFMC has committed to directly employing from UG 20 more specialized persons by year-end.
That ExxonMobil Tier I contractor last year contacted the University to recruit the engineers—six mechanical, two electrical and two civil engineers.
Each of the contracted University graduates has since been sent to Brazil by TechnipFMC for further training.
Article adapted from: http://oilnow.gy/news/bigger-investments-guyana-highest-learning-institution-needed-vc/
Don't neglect food security in pursuit of oil - UG Vice-Chancellor
The University of Guyana is keen to widen its educational offers to include the oil and gas sector, but in this pursuit Vice-Chancellor, Professor Ivelaw Griffith, has warned that there is a role for the university in maintaining Guyana’s food security. “We also recognize that we cannot neglect who we essentially are,” Professor Griffith told students at oil and gas presentation held on the university’s Turkeyen campus on Wednesday last.
He added, “We are an agricultural society and we will not do ourselves and prosperity well to neglect the agriculture sector.” According to Prof. Griffith, a feasibility team to look at establishing a food and nutrition institute at the university has been established. The team met for the first time in January to start the journey of ensuring that in partnership with other entities in Guyana and internationally, the university plays a vital role in food security.
One of the international agencies supporting the initiative is the Food and Agriculture Organization of the United Nations (FAO) which has provided US$5000 to start the study. Prof. Griffith noted that the university wants to ensure that connectivity with natural science, agriculture, earth and environmental science and social science, will enable partnerships with National Agricultural Research & Extension Institute (NAREI), Guyana School of Agriculture (GSA), Ministry of Education and public health. “We don’t neglect food security, especially since there is an opportunity for Guyana, not only in regard to the Caribbean, but in regard to being part of South America where we have some competitive advantage, but we need to stop viewing it as potential and we need to actualize it,” Prof. Griffith stated.
In relation to preparing the University for the oil and gas sector, Prof. Griffith said that they are ramping up what is being done across all faculties. He suggested changing the name of the faculty of technology while still catering for current programmes such as industrial and mechanical engineering. “Whether you want to do simply petroleum engineering or as we have committed to not neglecting mechanical, electrical and civil, we’ve got to do better physics, we got to do better chemistry, we got to do better math. The investments, we are going to argue, will have to do the whole of the university,” Prof. Griffith pointed out.
He outlined that the university is being proactive in its approach to the oil and gas sector by reaching out to other entities to establish partnerships. Prof. Griffith stated that he sent a member of the law department to an oil and gas seminar last year. In addition, last year, teams were sent to the University of Alberta, Canada and the University of the West Indies, Trinidad campus. “We cannot wait until all is available here for us to do what we need to do. We’ve got to partner. We have to develop and be prepared to offer relevant courses in the oil and gas industry,” Prof. Griffith stated. There are plans to engage experts in the oil and gas industry for a series of talks dubbed, Campus Conversations, which will aim to educate students and faculty members on the emerging sector.
NOTE: The grant from the FAO for the feasibility study is US $50, 000 and not US $5,000
UK BASED COMPANY WANTS TO HIRE UG STUDENTS
Some University of Guyana graduates and others in the disciplines of technology, business and other fields of study will cash in big time as a world renowned firm has shown interest to not only hire them, but also to prepare them for the upcoming oil and gas industry. This announcement was made by VICE Chancellor, Professor Ivelaw Griffith.
Ministry of the Presidency distances govt from Petroleum Advisor's criticisms of ExxonMobil contract
About five hours after Dr. Jan Mangal, Petroleum Advisor to President David Granger delivered a number of hard-hitting criticisms of the controversial ExxonMobil contract, government sought to dissociate itself from his positions.
“The Ministry of the Presidency puts on record that Dr. Jan Mangal, Presidential Advisor on Petroleum, is not authorised to speak on behalf of His Excellency, President David Granger or the Government of Guyana,” the Ministry of the Presidency said in a one-line statement issued at 9:50 PM.
Mangal delivered his presentation between 3 PM and shortly after 5 PM in his capacity as Presidential Advisor on Petroleum as was stated on the University of Guyana programme for its “Discussion on the Government of Guyana’s Vision for the Oil and Gas Sector”. He was introduced by that designation and at no time did he say whether or not he was speaking in his private or official capacity.
He stopped short of saying whether or not he would like to see the contract revised, opting only to remark that he would make known his views known in the coming weeks.
Mangal’s latest short-term contract expires in March.
At the forum, Mangal said the two percent royalty that Guyana secured from ExxonMobil in the 2017 Production Sharing Agreement was way below the globally accepted norms of between 10 and 20 percent. No tax on oil revenues did not find favour with Mangal who has worked in several oil producing nations.
He, however, welcomed the 50-50 percent split in profit oil.
Taking credit for pushing for the release of the ExxonMobil contract in December 2017, Mangal said that was needed to stimulate public debate so that civil society and the wider Guyanese community could determine whether it is a good or bad deal.
Mangal said he was also behind efforts to have the contract reviewed by experts from the International Monetary Fund (IMF) and the Inter-American Development Bank (IDB) to review contract.
At the same time, he cautioned against amending the contract because that could send a bad signal to investors.
Minister of Natural Resources, Raphael Trotman has repeatedly defended the contract, saying that previously there were no provisions for funding training and corporate social responsibility and there was no real royalty. He said the contract takes into consideration the political, financial and border-security related risks associated with the Guyana-Venezuela boundary controversy.
Guyana begins commercial oil production from the Liza well at a rate of 120,000 barrels per day. ExxonMobil is also eyeing the possibility of increasing its daily production soon after with the addition of another Floating, Production, Storage and Offloading (FPSO) vessel.
President Granger's Petroleum Advisor criticizes ExxonMobil's low royalty payment, control of large concession
Guyana’s two percent royalty on earnings from ExxonMobil’s oil sales is low compared to global standards, raising concerns about whether there was transparency about the negotiating system, Dr. Jan Mangal, Petroleum Advisor to President David Granger said Wednesday.
“What we can do is look at what are the international norms. Royalty, when you look around, is more between ten and twenty percent, not two percent,” Dr. Mangal told a discussion on the Government of Guyana’s Vision for the Oil and Gas Sector held at the University of Guyana’s Education Lecture Theatre.
He also noted that the tax is usually between 20 percent and 30 percent or more. Mangal remarked that the 50-50 percent profit share is “not bad”. However, the zero tax and two percent royalty that is in Guyana’s agreement has not gone down well with the advisor.
Asked whether the contract should be renegotiated, he said that was a question for Guyana to answer but he for the time being would withhold his view. “I am not at a stage yet where I am sharing that view publicly but it is under discussion,” he said. With “a lot of suspicion” still around about the oil sector, he said civil society and the wider Guyanese community need to develop greater trust of government and their representatives.
On the issue of whether the contract should not only be reviewed but also amended, the Petroleum expert said both contracting parties need to be comfortable. “if one party becomes really uncomfortable, it will change. Guyana is a sovereign country,” he said. At the same time he said policymakers would have to examine the trade-offs and be careful about scaring away investors. “Guyana has to be careful because that could be the perception, will be the perception but I don’t think it’s black and white. We have to be careful not to simplify too much and it’s not black and white and there could be a role for the grey area in the middle,” he said.
Mangal said he was pushing for experts from the Inter-American Development Bank and the International Monetary Fund and other agencies to conduct a “thorough a review of the contract” and for government to decide what it would do with the results.
While Minister of Natural Resources, Raphael Trotman continues to stress the benefits in the 2017 agreement with ExxonMobil when one considers the political, enormous financial and security risks facing that company, Mangal said Guyanese would be happier if there was transparency about the negotiating system. “The way I would be happy and you would probably be happy as well is if a process was followed and you knew who was involved and we knew their competencies and their expertise and they were respected did they go out there and bat for Guyana and they did they best they could but I think a lot of people in Guyana are questioning that,” he said.
Mangal noted that Guyana’s oil reserves discovered so far are of a very high quality and requires less processing. “I know it’s light oil which means it’s good oil and that’s a huge factor,” he said.
The Presidential Advisor, whose latest short-term contract ends in March 2018, said generally oil companies are “very powerful and experts in everything they do and they know how to influence governments to a ‘T'” but they could buckle under intense public pressure. “However, they can’t influence people. The only thing they are scared of is people so that’s why it’s important for Guyanese to have intelligent debate,” he said. At the same time, he cautioned against scaring away investors. After pushing for the ExxonMobil contract to be released, he welcomed the “brilliant analysis” that is leading to questions being asked.
Mangal promised to make his views known more frankly in the public in the coming months
The Presidential Advisor expressed grave concern about the fact that, based on the 1999 agreement and the new 2017 deal, ExxonMobil is controlling the entire Stabroek Block of about 600 blocks or 10 times more than what Guyana’s laws allow. “It is not good for one company owning too much of your acreage. Exxon already owns over fifty percent of the acreage in Guyana. That’s not good for Guyana,” he said.
Mangal argued that countries should benefit from diversity and competition in its acreage from companies from several parts of the world such as Europe and South America. “Oil is high-stakes, governments, companies they will do things at a high level,” he said. He recommended that Guyana examines how the acreage is allocated for the long term.
The Presidential Advisor warned against Guyana neglecting its agricultural sector, and instead recommended that a lot of the oil revenues be ploughed into that sector as well as developing physical infrastructure and the social sectors.
Big oil can influence Govts, but not the people - Guyana's Petroleum advisor
Advisor to President David Granger on Petroleum, Dr. Jan Mangal has outlined the power of the people to make their voices heard about what is taking place in the oil and gas sector, especially as it relates to the 2016 Production Sharing Agreement (PSA) signed between the Government and ExxonMobil. Dr. Mangal made the declaration in response to questions from students of the University of Guyana following an in-depth presentation on the Government of Guyana's Vision for the Oil and Gas Sector.
“What you will find is that oil companies… and this is not looking at Guyana, are very powerful, and experts in everything they do. They know how to influence Governments to a T. However, they can't influence people. The only thing they are scared of are people. That's why it is important for Guyanese to have an intelligent debate,” Dr. Mangal stated.
Responding to several questions which highlighted a number of shortcomings in the PSA, Mangal stated that a lot of people in Guyana are questioning who negotiated on Guyana's behalf. The PSA was released in December, and since then there have been daily debates about the provisions of the contract, with growing concern that Guyana did not get a fair deal. “What I would say is, let's see how the public debate goes on over the next couple of months,” Mangal noted.
The Presidential advisor is on record, pointing out that zero taxes on oil and the two percent royalties in the PSA is not the international norm for oil agreements. “We can all sit down and talk about it. The way I would be more happy and you would be more happy as well, is if a process was followed and we knew who was involved, and we knew their competencies and their expertise… and they were respected… and that they went out there to bat for Guyana and they did the best they could,” Mangal pointed out.
ExxonMobil is a multinational corporation with powerful reach which was run for a number of years by Rex Tillerson, the current United States Secretary of State. Mangal has pointed out that regardless of how powerful the company is, the people's view will weigh on the decision makers of the country. Dr. Mangal is a Guyanese who has spent 18 years in the industry, 13 of them with Chevron working on major oil and gas projects in the United States, West Africa and Asia. Amid growing calls for the contract to be renegotiated, Dr. Mangal noted that contracts should always be reviewed as new information becomes available.
“Contracts are always changed. A contract is an agreement between two people. Both parties need to be comfortable. If one party becomes really uncomfortable it will be changed,” Dr. Mangal pointed out. He stated that the question of renegotiating the contract is one that the people of Guyana must answer. According to Dr. Mangal, the focus last year was to get the ExxonMobil contract released to the public. He expressed his happiness that the information is out there and people are doing the analysis for themselves.
Article adapted from: http://www.petroleumworld.com/story18020905.htm
Petroleum Dept. & Food Institute for UG
The University of Guyana (UG) is in the process of establishing a Petroleum Department as well as a Food and Nutrition Institute.
Vice Chancellor of the University, Professor Ivelaw Griffith said the new facilities are timely since Guyana is becoming an oil producing nation but at the same time, needs to improve its capacity in the traditional economic sector of agriculture.
Professor Griffith announced on the final day of the GIPEX Summit that a study is underway to develop a Department of Petroleum Engineering.
“We have a working group helping to figure out the varying contributing elements to that. What kind of faculty do we need, what will be the curriculum, what are the lab equipment we might need, what are the linkages with industry, who might we have on the advisory board for that department,” he explained.
According to the University’s Vice-Chancellor, as Guyana becomes an oil-producing nation, its students need access to training in all aspects of the industry.
In this regard, Professor Griffith said the University is conducting a gap analysis to determine other areas that need improvement.
“The analysis we’re doing is with a view of the whole university enterprise. What is it we need to do better to prepare in law, what is it needs to be better prepared to do in the social sciences, what is under occupational health, in the medical field, what is it we need to do in nursing. We’re taking a comprehensive approach to the energy venture and adventure,” he stated.
The Vice-Chancellor cautioned that oil and gas should not consume all of the peoples’ energy since Guyana is and will remain an agriculture-based society.
As such, he said efforts are underway to launch a Food and Nutrition Institute on World Food Day on October 16, 2018.
The Food and Agriculture Organisation (FAO) had donated US$30,000 to the University of Guyana to conduct a feasibility study for the establishment of the institute.
Meanwhile, Professor Griffith reiterated that the University of Guyana stands ready to play a leading role in the country’s development.
Article adapted from: https://newsroom.gy/2018/02/09/petroleum-dept-food-institute-for-ug/
Company to oversee Guyana's commercial petroleum interests to be created next year
- local scientific institute, logistics base also on the cards
Natural Resources Minister Raphael Trotman has disclosed three key objectives which the Government of Guyana will be pursuing in 2018 to consolidate its capacity to effectively service a modern oil and gas industry including a national oil company which will be charged with responsibility for overseeing the country’s commercial interest in the sector.
At the same time, Trotman said that during next year government will be seeking the support of the Government of Mexico in pursuit of the creation of “a scientific institute to support cutting edge regulation and development of the sector and an onshore logistics base that will serve both as a revenue earner as well as to support the development of other local industries.
Making these disclosures during a presentation to a November 24 Stakeholder Symposium at the University of Guyana titled “Identifying and meeting the demands for engineering and operations management skill required in Guyana’s emerging oil and gas industry,” Trotman also cautioned his audience on the importance of us disabusing ourselves of the notion that large capital investment in the oil industry translates into significant levels of direct employment. Guyanese, he said, must instead continue to bear in mind that the oil industry generates revenue levels “that can be made available to expand development and provide jobs in other sectors of the economy”, Trotman declared.
Addressing a gathering at the Turkeyen Campus that included both lecturers and students, Trotman said that the advent of an oil economy will have the effect of creating many more jobs outside of the sector. “……….as you shift, think also of enhancing skills that are transferrable to other sectors,” Trotman told his audience.
Contextually, the Natural Resources Minister cited fabrication which he said could be utilized in mining and shipbuilding, information technology and telecommunications which can be applicable across a wide range of sectors as well as “welders, chefs, mechanics, logistics, marketing and business administration.” In effect, Trotman said, the advent of an oil economy could see “highly trained professionals as well as an inherent culture integrated into other pertinent sectors in the nation’s economy.”
In his presentation Trotman also sought to update the university community on the inventory of institutions that have already been created and those that are scheduled to be created in the period ahead to help manage the sector.
He disclosed that “at the level of Cabinet” government has created a sub-committee for the petroleum sector comprising the Ministers of State, Natural Resources, Finance, Infrastructure, Business and the Presidential Advisor on Petroleum whilst at the ministerial level a Petroleum Sector Ministerial Committee had been created comprising the Ministers of State, Natural Resources, Finance, Infrastructure and Business. At the level of the Ministry of Natural Resources itself, the Minister disclosed that the Ministry had been consistently expanding its internal capacity by engaging “expert advisors and establishing a Petroleum Department” in addition to supporting “key governance initiatives” including the recently created Guyana Extractive Industries Transparency Initiative (G-EITI) that allowed for the country’s subsequent membership of the international institution, the Extractive Industries Transparency Initiative (EITI).
The EITI is a global standard to promote the open and accountable management of oil, gas and mineral resources. It seeks to address the key governance issues of the oil, gas and mining sectors.
- The University of Guyana