Guyana’s Petroleum Road Map Part 2 - Guidepost 2: Indicated GoG Spending Priorities

Introduction

Today’s column addresses Guidepost 2, in Part 2 of Guyana’s Petroleum Road Map. To recall, Part 2 speaks to Government’s spending of expected petroleum revenues at full ramp up. And, Guidepost 2 specifically addresses spending on Government of Guyana (GoG) determined priorities. Recall also, GoG spending was assessed last week at between US$13 billion and US$22 billion annually, at full ramp up — a considerable sum!

The choice to begin with spending on GoG priorities is not random. This topic is first because of two considerations, both of which were highlighted in my column “summing up” Part 1 of the Road Map, which focused on “getting petroleum revenues” (June 23, 2019). In that summing up column, I had argued the Road Map does not constitute a detailed national spending plan. Nor is it a simple aggregation of a “to do list” for GoG spending! Instead, it aims to provide “strategic focus to a line of march aimed at specific strategic goals”. (ibid.)

In that column, I had also identified four of these strategic goals; namely: 1) to optimise petroleum revenues for the state; 2) to spend these revenues effectively; 3) to assure that the Contractors exploring and producing Guyana’s petroleum resources have the capability to achieve these outcomes efficiently; and, 4) to operationalise the entire process in a legal, transparent, competitive and equitable manner, based on best practices for monitoring, reporting and verifying (MRV).

A central observation which I made in that column is: by choice the Road Map deals principally with goals 1 and 2, listed above! And the reason for this, as indicated, is that I have little value to add to the other goals, although like others less bashful, I hold strong opinions on these matters, but prefer to prioritize value-added as my contribution, rather than regurgitations from the internet.

Government Priorities – Scope

I admit up front that, logically, GoG priorities can only be definitively specified by the State itself. Therefore, the items, which I present here can logically be challenged by the GoG. Bearing this in mind, I report that I have made strenuous efforts to remove from consideration any priority that might be challenged, because it is not either supported with strong evidence, or Government action in support of it. For these purposes, I categorise Government priorities into three broad groups, separated essentially by their timeframe.

The three categories are: First, those priorities that are “well underway” in terms of their conceptualisation and/or implementation, as we rapidly approach Guyana’s First Oil. Such priorities include items like the Extractive Industries Transparency Initiative (EITI); the National Resources Fund (NRF) or Sovereign Wealth Fund (SWF); the Local Content Requirements (LCRs); the Department of Energy (DoE), and the Petroleum Commission (PC)! The last represents all preparation efforts for a competent governance framework for First Oil.

Second, and at the other end of the time spectrum, is Government’s long-term development priorities. I doubt anyone can seriously deny that the Guyana Green State Development Strategy (GSDS) 2040 holds pride of place as the definitive indication of Government’s spending petroleum revenue priorities over the long-term. However, integrally linked to the GSDS is the GoG’s long-term international commitment, pledged in support of the global development programme, known as the United Nations Sustainable Development Goals (SDGs) to 2030. Those familiar with Guyana’s development strategising are aware the SDGs represent a nationally binding development framework

Third, and in-between the timeframe for items 1 and 3, is the annual to mediumterm priorities. There is little doubt that these annual indications come from, and will continue, to be found, in Government’s Annual National Budgets. By intent, though, these annual budgets express an element of the medium-term elaboration of the GoG’s development programme.

The GoG operates in regular (continuous) consultations with international financial institutions (IFIs), like the International Monetary Fund (IMF), the Inter-American Development Bank (IDB) and the World Bank (WB), and especially the first. These IFIs frame their support, technical assistance, and oversight of Guyana’s economy within medium-term frameworks and outlook.

Schedule 1 summarises the above descriptions. Observation challenge simply stated is: with the coming of First Oil, the elected Government has a right (indeed I would urge a duty) to indicate and implement its desired priorities, on behalf of the population that elected them. Therefore, any comments I offer on these GoG priorities are intended to improve them and not to suggest removing any from consideration.

Guidepost 5, which is to follow in due course, will introduce my two foundational Government spending recommendations. I wish to signal early therefore that these are not designed to be substituted for Government’s spending priorities as discussed under this Guidepost. Instead, they are designed to supplement these for two reasons. First, my proposals are premised on my bullish prediction of Government Take; while Government indicated spending priorities are premised on a conservative prediction of Government Take. In this sense, therefore, my proposals complement Government’s indicated priorities. Indeed, if needs be, they can be applied, if, and only if, GoG’s prediction of 750,000 barrels of oil equivalent is exceeded. Second, I shall also posit as I go forward that, elements of some programmes within the GSDS are consistent with the first of my two foundational spending recommendations; that is, prioritising renewable energy resources expenditures.

Conclusion

As this series has evolved, I have evaluated, in some detail, several of the first category of GoG priorities (for example, the NRF, EITI, PC and LCRs). I shall not repeat these in detail. Instead, I seek to remind readers that my critiques were and remain today, constructive and directed at raising GoG’s appreciation of any conceptual and/or other limitations. Critiques are therefore revisited for purposes of illustration. This task begins next week. Last Update: 555.77 Current Update: 555.77 Movement: 5.099% YTD Movement: 13.45%

LUCAS STOCK INDEX

The Lucas Stock Index (LSI) rose 5.099% during the fourth period of trading in July 2019. The stocks of six companies were traded, with 128,732 shares changing hands. There were three Climbers and one Tumbler. The stocks of Republic Bank Limited (RBL) rose 13.64% on the sale of 11,380 shares. The stocks of Banks DIH (DIH) rose 5.33% on the sale of 1,233 shares, and the stocks of Sterling Products Limited (SPL) rose 2.38% on the sale of 500 shares. The stocks of Demerara Tobacco Company (DTC) declined 0.10% on the sale of 230 shares. In the meanwhile, the stocks of Demerara Distillers Limited (DDL) and Guyana Bank for Trade and Industry (BTI) remained unchanged on the sale of 42,280 and 73,109 shares, respectively. The LSI closed at 584.11.