We need to stop fretting over the 2016 oil agreement

Dear Editor,

While I too share the same anxieties as many compatriots over whether government’s share of the revenues from the 2016 petroleum agreement will be the bonanza to finally launch the country into the economic stratosphere, the fact of the matter is we live in a world with established rules and expectations on how international business is conducted and how investment decisions are made by big corporations. If Guyana would like to persistently attract large investors and to be seen as having comparative advantages over other investment destinations, we need to stop the current fretting and grovelling over the 2016 agreement. Instead, we need to understand the rules of the game, unpalatable as some of them are, and adjust our mindset to the hard realities. There is little to gain in following the footsteps of the late Dr Cheddi Jagan in campaigning in the wilderness for a new Global Human Order.

Not much in the 2016 oil agreement should surprise. Firstly, the financial regime (profit oil, cost oil, cost recovery, tax waivers, and royalty) is what our consecutive governments have long advertised in their hunt for oil investors. As long as memory serves, these terms have been written on the GGMC website and in promotional brochures, and touted at conferences for decades.

Secondly, many of the terms in the agreement are standard features worldwide for our circumstances. For example, the much-criticized stability clause (Article 32) is, according to one World Bank study, included in over 100 oil contracts worldwide. As I explained in a previous letter, no company would make large long-term investments in the socalled Third World without a stability clause. Insurers, for one, would not touch such a project without it. That is a rule of the game.

Some have argued that because the 2016 agreement was negotiated after oil had been found (unlike the 1999 agreement), then Guyana should have used this fact to extract a better deal. But again, this is not how the game is played. Investments in the Stabroek Block were made under set upfront conditions. Had the company found nothing, it would have had to shoulder all the loss, with no cost to us. That’s one rule I am sure we like. But now that the company’s risk-taking has paid off with several oil finds, we cannot now demand that the conditions that lured the company in the first place be altered to our advantage. Any company could reasonably point out that had it known upfront that Guyana would seek to change the terms of doing business, this circumstance may have changed the investment calculus and caused it to seek fortune elsewhere. It’s akin to a landlord asking for more rent after a tenant has used his own money to upgrade the house. Is that a good image for Guyana to be projecting to foreign investors? One is reminded of the level-headed advice by Sir Shridath Ramphal and other thinkers in their 1978 report ‘South-South Dialogue’ that the worst thing for a developing country than being exploited is not being exploited.

The 2016 deal is sealed. It is time for us to begin, in a more structured and sustained manner, to discuss how we can wisely use our God-given blessings to transform the lives of our citizens within the next five years.

Yours faithfully, Sherwood Lowe