SO, the first oil to be extracted from Guyana’s bountiful wells in the Stabroek Block will be divvied up between ExxonMobil and its two partners, Hess and CNOOC. Guyana is to be allotted its first lift around February next year. This is according to the head of the Department of Energy (DoE), Dr Mark Bynoe, during a news conference on Wednesday.
It is not really important in the overall scheme of things who gets the first barrel as Guyana will presumably collect a two per cent royalty on that container of oil and there are supposedly billions more of oil equivalent where that came from.
What is amiss here is that Guyana’s negotiators have failed again to place the country ahead of its venture-capitalist partners. Purely for symbolic reasons and to establish firmly in the minds of the average Guyanese that this oil is Guyana’s patrimony, the first lift should have been ours — no ifs and buts.
Dr Bynoe’s explanation for why the first lift was not Guyana’s was typical bureaucratese and completely missed the point about the country’s ownership of its resources which ownership has been extended to Exxon, Hess and CNOOC by virtue of the scandalous 2016 Production Sharing Agreement (PSA) between the Guyana Government and Esso Exploration and Production Guyana Ltd (EEPGL).
According to Dr Bynoe, “ExxonMobil is not only a lifter, they are not only the operator, but they also have refineries. My understanding is the first lift often comes with a fair amount of impurities. Impurities in your crude can affect the price that you get for that crude, which would not only impact that batch but it could impact subsequent batches.”
What difference would a couple of thousand barrels of impurities make when one considers the huge revenues that have already been surrendered in the poor provisions of the PSA, particularly the paltry royalty, the absorption of Exxon’s taxes by the country, the lack of ring-fencing protection and the grand number of offshore blocks for the company and its partners to prospect in? The symbolism of first oil coming from the Liza 1 well was lost on the Guyana Government as very much else has been.
First oil should also underline the poor state in which Guyana remains when ranged against its powerful partners, one of whom is at present the subject of lawsuits in the US states of New York and Massachusetts for allegedly lying to its investors about the cost of climate change.
Despite having several years to conceptualise, perfect and legislate for first oil, Guyana remains without a Petroleum Commission to regulate the sector, without a local content law to even the scales in relation to what opportunities will be opened up to local companies and employees and there remain significant doubts that Guyana is sufficiently prepared for any type of spill from its wells. The fouling of large swathes of Brazil’s coastline from a yet-to-be-confirmed oil source is a cautionary tale for local regulators.
The country is also yet to see any medium to long-term plan for the oil sector as it relates to a depletion policy and the organic connection between oil extraction and Guyana’s aspirations to be a green state and achieve its Paris Accord climate commitments.
Where exactly is the plan to use oil revenues to pivot towards non-renewable energy sources? Should other oil blocks be held in reserve for future development in a more climate friendly environment rather than risk a free-for-all in Guyana’s waters?
All of these questions have been left in abeyance as Parliament is non-functional while the government throws all of its energies and the country’s resources in trying to perpetuate itself in office. When the first oil monies come they should be assigned to the Natural Resources Fund. Can this fund be properly activated in the present political stalemate?
With general and regional elections about 15 weeks away, Guyanese should insist that all contenders for the presidency lay out clearly where they stand on the renegotiation of the PSA with EEPGL and how they intend to claw back what Guyana might have lost in abject negotiations in 2016. They must also insist on scrutinising plans for the future development of the sector, apportioning of revenues and environmental safeguards.