…Nigel Hughes calls for better management of resources

GUYANA must do more to effectively manage its resources with the coming of oil, Attorney-at-Law Nigel Hughes said, warning that the country should not repeat the mistakes of the past.

Hughes, who sits as a Director on the Board of Directors of the Guyana Oil and Gas Association (GOGA), addressed Amerindian Leaders at the Arthur Chung Convention Centre on Tuesday on the budding oil-and-gas industry.

Hughes said that Guyanese at all strata of society must become oil smart by either positioning themselves to operate effectively within the oil-and-gas industry or become educated on the developments in the upcoming sector. Only an educated population, he said, would be able successfully guide the decision-making process. “We have to build capacity by making sure that we train the geologists, we train the economists, we train the oil experts,” he told the Indigenous leaders.

In acknowledging that training of Guyanese in various disciplines relative to the oil-and-as sector would take time, Hughes underscored the importance of having the government hire independent experts to give critical support in the meantime so as to ensure that the country gets its fair share when oil production starts in March 2020. He noted while there was a Presidential Adviser on the Petroleum, Dr. Jan Mangal, his contract has ended.
According to him it was poor negotiating and lack of proper advice that led to Guyana agreeing to receive 2 per cent royalty and 50 per cent of profits when it renegotiated the Petroleum Sharing Agreement (PSA) in 2006 with Esso Exploration and Production Guyana Limited – a subsidiary of U.S. oil giant ExxonMobil.

He noted that when the agreement was originally negotiated and signed in 1999, the then government agreed to a one per cent royalty. “At that time we didn’t know how much oil we had, we never found oil, and that is what they negotiated to attract development,” he justified.

Hughes argued, however, that when the PSA was renegotiated in 2016, the current government had sufficient information that could have resulted in the country receiving a better deal.

“In 2016 after they had found oil in 2015, after they knew we had 1.4 billion barrels, those of you who could remember, you would remember the big announcement was they renegotiated a production sharing agreement with 100% increase. That sounds impressive, you get 100% increase, you are very impressed but if you are moving from one to two it is a real waste of time…The reality was, when we renegotiated that as a country with Exxon we were fully aware of the fact that we have more than 1.4 billion barrels of oil in the ground, and all our negotiators could get was 2%,” Hughes said.

The A Partnership for National Unity + Alliance For Change (APNU+AFC) Government has maintained that Guyana in addition to the 2 per cent royalty will receive 50 per cent of the profits as an equal partner. Additionally, Guyanese are expected to benefit from “preferential treatment” in the provision of goods, materials and sub-contractual arrangements with ExxonMobil’s petroleum operations here, in keeping with Article 18 of the Agreement. Even ahead of 2020, Guyanese at the individual and corporate levels have been conducting business with ExxonMobil and its subsidiary.

BUILD CAPACITY
That aside, Hughes doubted the country’s current ability to manage the massive amount of oil revenues it will receive when it starts pumping for oil, and as such further reiterated the need to build capacity.

He said history would show that after 52 years of becoming an independent nation, Guyana has not been able to manage its resources to the benefit of its people, noting that no single person or organisation should be blamed but Guyanese as a collective. “If you ask yourself after 50 years, Guyana with all the gold it has, with all the raw metals it has, with all the bauxite and now with all the oil it has, why are we not ahead of the rest of the Caribbean, rather than competing with Haiti in terms of economic figures to be at the bottom…at the end of the day it is us, we have failed to deliver and we have failed to manage the resources,” he said.

GOV’T LAYING THE STRUCTURE
The APNU+AFC Government is presently putting the necessary administrative and legislative frameworks in place to ensure the effective and efficient management of the oil-and-gas industry. President David Granger has assured that by the end of August the Department of Energy would be established. A 10-point plan has been crafted to ensure the Department of Energy, which will fall under the Ministry of the Presidency, is effectively positioned to manage the potentially massive and transformative emergent petroleum sector.

The plan is aimed at ensuring that matters such as organisational structure, legislation and capacity-building measures are effectively addressed as Guyana works toward developing a world-class oil-and-gas industry.

The President said his government is open to recruiting technical experts locally, regionally and internationally through a highly competitive and transparent process to attract the most qualified and experienced professionals available.

Presently, the government is working assiduously to put legislative and regulatory frameworks in place, such as the crafting of the Petroleum Bill and a Sovereign Wealth Fund, to safeguard the oil-and-gas industry. Ahead of first-oil in 2020, the Work Bank in June approved a US$35M Development Policy Credit to strengthen Guyana’s financial sector and fiscal-management capabilities. In excess of 3.7 billion oil-equivalent barrels have been discovered in eight reservoirs: Liza, Payara, Liza Deep, Snoek, Turbot, Ranger, Pacora and most recently Longtail-1, and the World Bank wants to ensure that the country is well equipped to transform its oil wealth into human capital.

Presently, nearly one in four people in Guyana live in poverty, however, experts estimate that GDP will surge when commercial production of newly discovered oil and gas begins. In response, the A Partnership for National Unity + Alliance For Change (APNU+AFC) Government has embarked on a series of reforms to diversify the economy and turn oil windfalls into human development and sustainable growth in the long term.