500,000 Barrels A Day.

With the production of 500,000 barrels a day for 300 days a year at US$40 a barrel, the annual income would be US$6 billion. The cost of production of oil varies widely, depending on whether it is onshore or offshore and if offshore, how far away and how deep. To give some idea North Sea oil was produced by BP in 2014 at US$30 a barrel. It went down to US$15 a barrel in 2017 and is expected to go down to US$12 a barrel by 2020. The estimated cost of production in offshore Guyana has not been made known by either the Government or ExxonMobil. We are therefore left to speculate.

Assuming that a maximum of about half of the income would be deducted as production costs, US$3 billion would be deducted as production costs from an annual income of US$6 billion. Guyana would earn 50 percent of the profit, that is, US$1.5 billion plus 2 percent of US$6 billion as royalty which would add another US$120 million. At minimum, therefore, Guyana’s economy would double. More likely than not, Guyana’s economy would grow to three times its current size and even more, if the price remains around US$60 per barrel and if more discoveries are made resulting in higher production. ExxonMobil has drilled only eight wells in seven of which oil was discovered. It plans to drill another twenty. There are also other blocks to be explored by other oil companies and other blocks yet to be given out for exploration.

The public debate so far has focused on the terms of the Petroleum Sharing Agreement between the Government of Guyana and the oil companies represented by ExxonMobil. This debate is continuing. Foreign experts have given ideas to public forums as to what pitfalls Guyana should avoid and what preparations Guyana should make, including what skills training should be promoted. Little or no attention has so far been paid to how and where Guyana should deploy its oil income to prepare for the time when the demand for oil and its price will decline, except in broad terms to avoid the Dutch disease. It is not too early to do so as time is not on Guyana’s side.

Many countries have already decided to ban new fossil fuel vehicles. These include Norway 2025, Britain 2040, France 2040, India 2030, Ireland 2030, The Netherlands 2030, Germany 2030, USA (California) 2040, China 2018 (533 models). The list is growing. Very soon, therefore, the demand for oil will begin to decline. Many who are knowledgeable about the oil industry are confident, however, that just as China and India, the Asian Tigers, and the Emerging Economies developed, other sources of demand will emerge and there will be no diminution of demand for oil. This might well occur, but on the current evidence and the growing clamour in support of climate change, Guyana needs to prepare its plans for the sustainable development of its economy so that it will continue to grow if and when the oil boom dissipates or disappears altogether.

While it must be conceded that the Government has much on its plate at the moment, it is missing in action on its plans for Guyana’s future. It would bring great disaster to Guyana if the proposed expenditure of the oil income is planned behind the closed doors of the Ministry of Finance and Cabinet and then rolled out as oracles to the Guyanese public in a take it or leave approach, finessed by one or more budget debates in the National Assembly as a substitute for genuine consultation.

It is understood that most Guyanese would support substantially increased expenditure on infrastructure, education and health. But quite apart from the fact that resources would not be limitless, absorptive capacity would be limited. For example, enough engineers, educators, medical personnel and other skills would not be available to ensure the timely and efficient expenditure of resources which might be available. Further, in relation to, say, infrastructure, the Government will have to decide priorities – what and where to target. Should it be hydropower or gas to supply cheaper electricity so as to encourage agro-industries and industrial development generally? Should it be farm to market roads, bridges and communications generally as the first of what will have to be numerous steps to encourage agriculture so that Guyana can tap into the huge food market in the Caribbean as oil income recedes? Should it be telecommunication infrastructure to encourage an information technology industry to take advantage of Guyanese having a neutral English accent and being in the same time zone with the US? Everything cannot be done at once so that emphases have to be decided and targets set. And these views are only on infrastructure. We have not yet touched education and health.

The task is monumental and there is no sign that the Government has begun to address these matters and the preliminary steps forward. Expertise is needed at this planning stage. None are being recruited. Unless the Government acts soon, the result will be haphazard and ill-informed planning with no public input or support and the consequential wastage of our oil wealth as we have seen in so many countries around the world.

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  1. Some things are grossly incorrect in your calculations of Guyana Incone from Oil.
    1.The projection is 100,000 barrels of oil per day.Why are you using 500,000.Please help us understand where this information comes from.

    2.The contract states that 25% of production is profit sharing which based on your numbers Guyana will get $750,000 and not $1.5million.

    3. Guyana will be paid in barrels of oil not cash so there would be cost to transport to the Refinery ,most likely in Texas and these cost will reduce Guyana share of $750,000.
    4.The price of crude oil will be determined at the product at Delivery point. I suspect Excon will deduct the transportation cost from the market price again reducing Guyana Take.
    5.The Royaly based on your figures times 2% will generate $120 million.I am nearly sure that Exxon will deduct this royalty in arriving at Profit Sharing.Technically this method will reduce the profit and Guyana will effectively revive 1% as Royalty when all is used in computation of income for profit sharing.
    6. I suggest that when prominent people take the stage they have an obligation to present in an accurate way the benefits accruing to the Guyanese people and suggest that you be more explanatory in your writings in the future.
    7.Further it would be appreciated if you could help us with the members of the negotiating team.These people have sold out our oil resources and our country and we should investigate their financial position.
    8 In a day or 2 I will provide a more seat ailed analysis considering all the facts that we have to date.The contract is one of the worst I have seen in my times and in the intellectual circles Guyana and its people have become a laughing stock.

  2. Thanks for your article Mr. Ramkarran!You are very precise and very much to the point as regards the inadequacies of the present regime in Guyana.

    Let us hope that we see, soon, the emergence of saner individuals who are going to take over the reins of our country and be diligent for the People of Guyana. This mess we are in for the past 54 years,except for the first few years of the PPP’s advent to Governorship in 1992, must be brought to an end.

    Time is running out for the aforementioned emergence of the people needed to bring change. Please let us get going on this. Everyday that passes is a day lost and is one day wasted!

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