…on oil royalties
So, finally, we have some details on how we’re to be raped in regard to the oil revenues from ExxonMobil through the ineptitude of Raphael Trotman, who snagged the Natural Resources’ portfolio only because of the “Nassau Accord”.
From the word go, your Eyewitness has been emphasising that the only way Guyana would get its fair share of the oil that’ll be pumped out and gone forever is to begin with ROYALTIES.
Royalties come off the TOP; that is, as a percentage of the total revenues garnered on sales BEFORE anything is deducted. Exxon pumps, say, 1000 barrels per day and the price is US$50/barrel, the royalty will be calculated on US$50,000. We pointed out that Uganda, which were recommended to help us with preparations for our oil regime, had negotiated a 15% royalty on their oil. In comparison, Malaysia had a 10% and Nigeria 8%. So what did this genius Trotman negotiate?? 2%!!!! Royalties will scrape in a measly $1000!! At 15% we would’ve gotten US$7500 on every barrel of US$50 oil.
Right away Guyanese should know something stinks to high heaven with the man who introduced the term “political investment” into our political lexicon. Why else would he shaft Guyana like this?? His excuse was the 1999 exploration agreement the PPP had signed specified a 1% royalty. Well…DUH!!! We already pointed out that THAT contract was signed when no one knew Guyana REALLY had oil. It was a shot in the dark. The oil exploration companies were in a stronger position with them taking the risks and not knowing whether they’ll strike oil.
Trotman negotiated his deal with Exxon AFTER it was CONFIRMED there were at least 1.5billion barrels of oil sloshing around under our sea bed!! GUYANA was now in a stronger position. Especially since Exxon had walked away from its Canadian Tar Sands reserves and was barred from exploring its Arctic reserves. Ours was the biggest oil find in all of 2016 — not only for Exxon!!
So where does this leave us? As you, Dear Readers, would know, your Eyewitness predicted two years ago that $50 oil will be the new average. He’s explained why ad nauseam. With Trotman’s 2% royalty, after we collect US$1000 royalty, (we hope he had the sense to specify, MONTHLY!) Exxon could’ve taken UP TO 75% of the revenues — after deducting royalties — as “cost oil”; that is, to cover its exploration costs and present production costs. Did Trotman negotiate this down to a fixed 50% as your Eyewitness suggested?
If, as expected, he did not, we then split the “profits” — of 25% or US$12,250 — down the middle. We end up with an additional US$6,125/barrel.
Instead, we get peanuts, thanks to a venal Trotman.
…on other oil fronts?
The other question Trotman should answer is: Will we get a bonus from Exxon for signing the contract? While this is usually small – around US$2M — every dollar counts TODAY. And another thing: Which accounting firms will be checking Exxon as to what they’ll be inflating? And inflate they will — as expended expenses to boost their share of the oil as “cost oil”!! Trotman should now realise why Exxon doesn’t skimp on accountants.
Did he also forbid Exxon from claiming expenses for hiring lawyers etc — in the event of litigation, as “employment costs”?? If he didn’t — and your Eyewitness bet he didn’t — then these’ll go into “cost oil,” and we end up paying for THEIR lawyers! But, most importantly, did he insist that Exxon should pay the Guyanese corporate income tax of 27.5%??
See, your Eyewitness is very fair; he didn’t insist on the “commercial” income tax rate of 40%!
But was Trotman fair to us?
…on Guyana’s share
Trotman’s been flacking for Exxon by emphasizing that “Guyana will get 50% of profits”. For the average Guyanese, this sounds “fair”; but, as revealed above — and that was merely scratching the surface — the Devil’s in the details.
And those details are still secret!