Wait a while to talk renegotiation; show that investments in Guyana are stable – Bhagwandin

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OilNOW
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Calls for Exxon’s Stabroek Block production sharing agreement to be renegotiated have not waned in some quarters. Guyanese economist Joel Bhagwandin says proponents are acting prematurely. He urges them to wait a few political cycles. 

“The sanctity of an investment contract and stability of investment goes hand in hand,” Bhagwandin said. “This is especially important when a country that is historically underdeveloped has been starved for investments, foreign direct investment (FDI) in particular, and is seeking to stimulate investors’ confidence and to attract investments in the economy.”

Stabroek Block PSA terms enable mega projects at industry-leading standard- stakeholder | OilNOW

He argued that investments of this nature have a multiplier effect. They help to create sustainable employment opportunities, develop and monetise the natural resources of the country, contribute to national development through the value chain matrix, tax revenue for the state, expand foreign exchange earnings through exports, and improve the overall social and economic well-being of the country. 

And because the oil business is so risky, Bhagwandin explained that it is particularly important to minimise the political and market risks to lend to an attractive investment climate. Guyana expects to be in the oil business for several decades and the economist explained that there is enough time to preserve the stability of the Stabroek Block PSA for three to five political cycles (15-25 years).

Stabroek Block agreement equitable for both government, investors – Exxon | OilNOW

Critics of the Stabroek Block PSA say Guyana’s portion of revenues is not enough, and that there are other provisions, which give unfair favour to the co-venturers. The contract allows the co-venturers to recover costs up to a ceiling of 75% and splits the profits 50/50 between government and companies. Government also collects a royalty of 2% of petroleum produced and sold. The government has assured the companies that it will preserve the contract.

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