… just not in same magnitude as oil and gas, World Bank official says
MINISTER of Natural Resources, Raphael Trotman, has reiterated that the government is committed to ensuring that a Sovereign Wealth Fund (SWF) is established before the production of oil in 2020.
Government’s intention was to establish the Fund in the first quarter of this year but the period was extended to allow stakeholders to be sensitised properly about the new oil and gas industry.
One of the most recent sensitisation programmes was the SWF workshop which was organised by the World Bank for Parliamentarians.
“I am happy that we are having another engagement on the management of oil and gas; how the revenue should be managed and so forth,” Minister Trotman said, in an invited comment on the sidelines of the workshop at the Marriott Hotel on Monday.
He believes that any learning is good learning because what it does, in essence, is prepare participants; on this occasion it is Parliamentarians, for an industry that is totally new to Guyana.
As Minister Trotman observed, although the government has been open to learning a thing or two about the SWF, it still intends to establish the Fund before production starts.
According to World Bank Director for the Caribbean and Latin America Ms Tahseen Sayed Khan, the whole purpose of the training is to share global expertise and knowledge with parliamentarians so that the revenue coming from the wells would be managed properly.
On this occasion, training involved two oil and gas experts, who have worked in Africa, Sudan, Asia, Lebanon, Norway and even Holland, discussing ways in which the government could use the SWF to improve the economy.
Khan said the parliamentarians had an opportunity to examine how countries in Europe, Asia and Africa established the Fund to be used as a stabilisation factor to help future generations by ensuring that the wealth is well distributed.
She believes that the main functions of the Fund should be to help people who are not rich and to provide finance for health, education and social services.
“The interesting thing is that Guyana has always had resource wealth – gold and timber – so there is a familiarity with handling resources,” the Pakistani-born development and financial specialist said, adding that the country is, however, not accustomed to handling income the magnitude of oil and gas.
She suggests that in order to ensure that the sector is properly managed there should be good advanced planning, transparency and consensus-building so as to allow Guyana to prepare well in advance.
Ms Khan is not the only person to stress the importance of having an SWF, as back in March, US Ambassador to Guyana, Mr Perry Holloway, had pretty much said the same thing; that there is need now more than ever, with the country moving into the realm of an important energy market, for a strong and transparent SWF.
Ambassador Holloway had noted in an ‘op-ed’ that in spite of the often exaggerated gloom-and-doom pronouncements in some quarters, Guyana is poised to become one of the richest countries in the region with considerable revenue streams.
He had said too that the Fund will immediately begin to invest in education, health, infrastructure, agriculture, and security sectors of the country.
“I am referring to a concerted effort by all stakeholders to start a continuous conversation on how best to implement fiscal plans that directly address the needs of all Guyanese now,” Ambassador Holloway had said, adding that the development of a comprehensive SWF is the opportunity the country has been expecting to leverage the prosperity of the future into the development of the present.
According to Oil Now, ExxonMobil, through its local subsidiary Esso Exploration and Production Guyana Limited and joint-venture partners HESS and CNOOC Nexen, is expected to begin production at around 120,000 barrels of oil per day.
This being the case, Guyana will, from day one of production, receive 2% of the oil produced before cost is deducted, and 50 per cent of the profits, after cost is deducted.
The Oil Now report stated that royalty plus Guyana’s share of profit will result in the country receiving approximately 17,100 barrels of oil per day.
And at US$50 per barrel, that means that from day one of production, Guyana will be making US$855,000 (17,100 x US$50). The price of oil, as of February 28, 2018 stands at US$66 per barrel. If this price holds, Guyana would instead be making US$1,128,600 from day one of production.