Dear Editor,
The Global Witness sneak preview of its report is a classic example of agenda-driven journalism. Apparently the environmental campaigning outfit can peer into a magical crystal ball and calculate how much Guyana will lose over 40 years(!) due to the “bad” contract. This is based on OpenOil deciding Guyana should be getting a take of 69 per cent.

How they arrive at this figure is not clear. Other analysts have said Guyana is right in the middle for a frontier territory and at the time of the renewal, Exxon had only discovered one well and the basin was still not derisked.

In fact it remains largely so, as seen by the expensive failures of Tullow and Respol to discover oil. The reality is that no one could have predicted how Exxon might have reacted to a different PSA. It might have delayed development given that oil prices at the time were ruinously low.

So let’s instead talk about what has happened and what is the reality: Exxon and its partners are moving fast to develop the block. This has already seen benefits to Guyana with revenues coming in ahead of schedule. And because there was a surplus of rigs and other equipment to develop Liza One it has already saved US$900M on that project.

That is a real US$900M saving – not something projected 40 years hence. Additionally Exxon is fast forwarding and streamlining the construction of its second and third FPSOs meaning more savings and earlier revenues to the government and people of Guyana. Finally, all this activity is creating jobs and seeing large boosts to tangential sectors such as construction, travel and hospitality. That is the present day reality.

Stabroek News’ own columnist, Professor Clive Thomas, in a series of thorough and balanced articles evaluating the OpenOil analysis of the contract cautioned that it was extremely hard to predict how contracts would play out and that modelers should be required to have “the same basic responsibility of not simplifying their results and overstating their predictive power, especially for constituencies easily bedazzled by headlines with numerical allusions, like “outlier low” and “costing Guyana billions”.

Oil is the highest risk business on the planet with companies taking multi-billion gambles based on the search for and production of a commodity whose price is extremely volatile. For example, the price of Brent Crude went from a high of US$125 in 2012 to US$30 in 2016. Recent events including the Coronavirus outbreak in China have seen prices drop by US$10 per barrel in a matter of weeks. Such factors as supply and demand, global growth and Middle East tensions will have far more impact on Guyana’s fortunes.

But the reality as of today is that the country is now an oil producer and appears to be on the road in the next five years to see substantial revenues per capita. Any predictions past 2025 and up to 2060 we will leave to Global Witness.
Regards,
Albert Russell