–with payment for eighth oil lift
GUYANA’S rapidly growing Natural Resources Fund (NRF) has closed off 2021 with a balance of US$607.8 million, which is in excess of G$126.9 billion.
This was according to Minister of Natural Resources, Vickram Bharrat, who, in an invited comment on Thursday, said that this increase is owed to payments received for the country’s eighth oil lift, which took place in November last.
Based on calculations, this means that the country was paid approximately US$73.8 million or more than G$15.4 billion for its latest oil sale of about one million barrels.
Added to that, Minister Bharrat said that stakeholders are already preparing to execute the nation’s ninth oil lift, which is due in the coming weeks.
He said that as all the lifts before, the ninth will also be drawn from the Liza Destiny Floating Production Storage and Offloading (FPSO) vessel.
The Natural Resources Minister further said that Guyana’s second oil ship, the Liza Unity, is already gearing up to come on stream, as planned, before the end of the first quarter of 2022.
Once this happens, Minister Bharrat estimates that Guyana’s oil lifts will become as frequent as once every two months.
The Liza Unity vessel, twice the size of its sister-ship, the Liza Destiny, was built to produce 220,000 barrels of oil per day, with an overall storage volume of up to two million barrels.
But Guyana is not stopping there. During a previous interview, Minister Bharrat projected that by 2026, the oil and gas industry will be serviced by a fleet of four FPSOs, which would have the capacity to facilitate as much as 50 oil lifts per year, at one million barrels per lift.
In the coming years, both the Liza Destiny and the Liza Unity will be supported by the Prosperity FPSO which is under construction in Singapore and the Yellowtail FPSO, which is slated to come on stream by 2026. By that time, the minister estimates that “proceeds from oil and gas will be mind-blowing.”
Moreover, should the cost of Brent crude continue to hover at more than US$80 a barrel, Guyana would be poised to earn at least US$4 billion or G$836.9 billion by the end of each year. To paint an even clearer picture, oil proceeds by 2026 will be about twice the size of the 2021 national budget, which totalled $383 billion.
Ever since Guyana sold its first one million barrels of crude in February 2020, for nearly US$55 million, the account, housed in the US Federal Reserve Bank, has remained untouched. However, the government’s passage of a new and improved Natural Resources Fund (NRF) legislation paves the way for the government to begin spending.
In the first instance, Guyana will be able to withdraw 100 per cent of the funds contained in the NRF. Thereafter, a cap would be instituted, taking effect at 75 per cent of the second US$500 million deposited into the NRF, followed by 50 per cent, then 25 per cent, five per cent, and finally, at three per cent of any amounts in excess of $2.5 billion.
It is currently unclear as to when the People’s Progressive Party/Civic (PPP/C) government intends to begin spending from the fund, but what is known is that the administration held off from dipping into the petroleum revenues, pending modifications to the “flawed” NRF 2019 legislation.
Not only was the Bill passed in the absence of the then PPP/C opposition, but it was signed into law by a government which was practically in “caretaker” mode, since the then A Partnership for National Unity + Alliance For Change (APNU+AFC) administration had already been toppled with the passage of a no-confidence motion in the National Assembly.
REMEDIED WITH URGENCY
When the Dr. Irfaan Ali-led administration assumed office in August 2020, following a six-month long elections debacle, it vowed to ensure that critical issues to the legislation were remedied with urgency.
As a result, a new NRF legislation was crafted with the input of key stakeholders including the private sector and civil society.
A few weeks ago, in December, the 2019 NRF law was replaced with the 2021 legislation, amid a massive ruckus created by the now APNU+AFC opposition.
Eventually, even an attempt to steal the Speaker’s Mace and the abuse of Parliament staff were not enough to prevent passage of the new law, which sought to impose strict and transparent guidelines on how the oil revenues are to be spent.
It also limits the powers of the Minister of Finance, whilst instituting hefty penalties for breaches, especially as it relates to non-disclosures of the country’s petroleum earnings.
Additionally, the new law introduced the aforementioned caps to ensure that withdrawals are done in a fiscally responsible manner, which guarantees savings for the benefit of generations.
The new law also ensures that withdrawals from the NRF benefit from both pre and post parliamentary scrutiny, since all spending has to be clearly outlined in the national budget.
This means that programmes being funded by oil revenues have to first be approved by the National Assembly, after which its implementation is audited by the national Audit Office; any discrepancies detected are then compiled and forwarded to the Opposition-led parliamentary Public Accounts Committee for further scrutiny.
Even further, the new law stipulates that the oil revenues could only be used to finance developmental projects.
More specifically, President Ali had pledged to ensure that Guyana does not become reliant on the oil sector.
On the contrary, he said that the oil earnings will be invested in the development of critical non-oil sectors such as education, agriculture, health and social services, among other things.
With 27 lucrative discoveries, and a massive drilling campaign still to come, Guyana, one of the world’s fastest growing economies, is pegged to have quite a bright future, especially with the implementation of other important pieces of legislation such as the one to govern Local Content.
For the next few years, all eyes will remain on Guyana, looking to see whether the country will be able to fulfil its projection as the “Dubai of South America.”