Guyana is weighing the use of bonds as a financing tool to deepen local participation in its growing oil and gas sector. This is according to Vice President Bharrat Jagdeo during his weekly press briefing on April 10. The move mirrors a strategy recently adopted by Suriname aimed at empowering local companies and citizens to invest in energy projects.
Suriname’s first offshore oil project is currently under development.
Guyana is years ahead, but with a massive gas project on the horizon, several spin-offs are anticipated. Earlier this year, Jagdeo disclosed that the government has identified three investment vehicles for ordinary Guyanese to tap into.
“We could issue the bond…have people subscribe to the bond at a guaranteed coupon rate or interest rate so that they get the stake which would be significantly higher than what they get from putting their money in the bank,” he explained further this week.
Shares are also another route, according to the VP.
For shares, Jagdeo explained that the plan would limit how many an individual can buy to ensure broad public participation. He said since the venture – such as the Fertilizer Plant being eyed – is expected to be profitable, the government could guarantee a minimum return, about 10% annually, to attract small investors like farmers, teachers, miners, and public servants. If profits are high, the VP said returns could go up to 20%, but they won’t drop below the guaranteed floor. In essence, there’s a safety net, but still room to earn more when the sector does well.
Staatsolie, Suriname’s state oil company, allowed citizens to invest in a bond to raise the millions needed for its participation in offshore oil development. The avenue worked so well that Staatsolie exceeded its target, raising US$515.8 million—US$211.7 million more than its initial target of US$304.1 million.
Staatsolie gets a 20% stake in the GranMorgu development.
The total investment for the project is estimated at US$ 12.2 billion, with Staatsolie’s share amounting to US$ 2.4 billion. With the bonds, Staatsolie decreases its need for hefty bank loans.
