Despite Guyana’s economy projecting to grow by a whopping 86 per cent in 2020 as a result of its budding oil and gas sector, there would not be much to show in the country’s treasury, says Opposition Leader Bharrat Jagdeo.
The International Monetary Fund (IMF), in its September 2019 report, projected that Guyana’s economy will explode from its current 4.4 per cent to 86 per cent. It was previously reported that first oil, which was initially set for early next year but has been confirmed for next month, will see the country’s economic growth tripling in the years to come.
But according to Jagdeo, while the massive Gross Domestic Product (GDP) growth may sound good, this is not necessarily the case.
“This oil that is produced – if it’s going to triple the size of our economy, there is an assumption that the revenue to the State will also go up three times. So if we’re collecting a billion dollars now, maybe we will collect three billion dollars then in revenue because somehow, there is this mistaken view that there is a correlation between this growth and revenue to the treasury,” he told reporters at his weekly press conference on Thursday.
The Opposition Leader went on to bash the coalition government for failing to secure deals with the oil companies that will see Guyana and its people getting more.
“This Government should be ashamed now and it’s highly insensitive of Hess [Corporation] now to say the things they’ve been saying,” he asserted.
Recently, Hess Corp – which, along with US oil giant ExxonMobil and China’s State-owned CNOOC Limited, are operating the oil-rich Stabroek Block where 14 discoveries of over 5 billion barrels of crude were made – recently told their shareholders to watch out for a massive increase of cash flow, since the deal it signed with the Guyana Government will see the Government covering the company’s taxes from its share of profit oil.
“‘So we don’t have to pay any tax. The Government will be paying our taxes for us from their share of profit oil, which is a small share already.’ This is what Hess just told their shareholders. So their shareholders will expect a windfall and Guyana will be paying from our share of the oil, a small share that we’re getting, and their tax obligations. So for them, it’s pure cash-flow; that is why our treasury will get a small amount of money,” the Opposition Leader contended.
According to Jagdeo, people are only talking up the numbers entirely without saying what will actually come to us.
In fact, he noted that not only will the country be losing out financially but its people will also face the same fate with the lack of adequate local content regulations.
“How much money they will spend in our country, buying from our people, creating jobs our people – that has not been defined. This Government has an obligation to do so and it has not done so. There is no local content legislation. They’re not looking out for our people… There are things that could be done by us to ensure the revenue flow back to our people and the Government is sleeping,” he asserted.
The Opposition Leader went on to point out that the oil and gas industry is capital intensive and while there will be massive economic growth, the sector will produce very little direct employment.
“So we could possibly see a steep growth in our Gross Domestic Product and the 30,000 plus jobs we lost already, we’re only gonna get like four or five thousand new jobs. So we will be net worse off in terms of jobs even if the economic growth is high,” Jagdeo stated.
Last week, Hess announced that commercial oil production offshore Guyana will now start in December. The Liza Phase 1 development is expected to produce some 120,000 barrels of oil per day and it is estimated that Guyana will earn some US$300 million annually.
As such, the Opposition Leader reminded on Thursday that none of the monies earned from this sector can be used before next year’s March 2 General and Regional Elections. In fact, he noted that in the absence of critical legislation to guide the petroleum industry, interim arrangements will have to be put in place.
“You can’t stop the production. The resources [coming from oil] have to escrow… All they should be doing now is measuring how much oil is produced and tie up an interim contract. So if our share start flowing say by February/March, tie a contract for the first three months for Exxon to lift it for us. But we measure how much oil has come out so we know what our share is. That’s all that should be done at this point in time and then when the new Government comes in, then it deals with all these other issues,” he stressed.
Previously, the PPP had outlined plans to have implement policies that will see politicians having an arms-length relationship with the petroleum industry, as well as holding officials accountable for non-disclosures of resources obtained from the sector.
Exploration activities offshore Guyana are also being undertaken in the Orinduik Block with British company, Tullow Oil, striking two discoveries.