Revenues from ExxonMobil’s oil find here could be at least four times Guyana’s national budget at current market prices, and a top US Embassy official here has urged government to move swiftly to implement measures to ensure transparency and accountability.
“We are looking at projections that based on our estimates, go from somewhere between four and five times the current national budget. So that’s substantial and obviously if the oil price goes up, that can be significantly more,” Deputy Chief of Mission at the US Embassy here, Bryan Hunt, told Stabroek News, in an interview.
“I think even with a weak oil price, ExxonMobil has indicated they plan to move forward with their development on the Stabroek Block. The contract that the government has includes a significant amount of revenue coming in to their coffers so we are talking a lot by any stretch. Imagine…four to five times the national budget. You can imagine how that can transform a government’s ability to do things, for good or for ill, depending on how it is used,” he said.
Hunt’s assignment here comes to an end this month and he leaves Guyana to take up a similar post in Mozambique. He reflected on the three years he has spent here under two administrations: the PPP/C and the current APNU+AFC coalition government.
Of significant importance, the United States envoy said, is management of oil funds which would be unprecedented. He reiterated what he had said during a farewell address at a reception held in his honour last week that monies from oil have the potential to build or destroy a country, depending on how it is managed.
Since the news of the discovery of a large oil deposit about 120 nautical miles offshore Guyana by ExxonMobil last year, there has been no projection of the revenue that the country could rake in. Hunt was therefore asked the basis for him saying that monies garnered would be plentiful even with current weak oil prices.
Significant revenue
“Given the size of the discovery that ExxonMobil has made…a lower oil price is still going to result in a significant amount of revenue. If the price goes up, it means even more revenue,” the US diplomat said. “That’s one project. Obviously there are a lot of other companies that is exploring off of your coast. We don’t yet know what is going to happen with the Repsol project, the CGX and some of the other concessions that have been given.
What I am looking at is simply the known projections for ExxonMobil. You add the others, it could be significantly more if they are successful…the fact that you have now found one sizable discovery, it leaves most in the industry to believe that there is more in other blocks off your coast,” he added.
Given the scenario of a windfall, the US has repeatedly urged Guyana to ensure that the revenues are transparently utilised and properly spent, Hunt pointed out, though he noted that there was not much time to get the systems implemented.
“It is fair to say we have a long way to go and a short time to get there. I don’t want to suggest that the government in any way has neglected its responsibilities. Quite the contrary, we have had very productive discussions with the government that is currently in office and with the previous government on these issues,” Hunt asserted.
He said he believes that government has begun to look at its internal financial management, which to him “is certainly a very important place to start.” He pointed to the decision by the David Granger administration to conduct forensic audits of various government entities.
“It is important for a number of reasons….it gives you an indication of what the problems were with the existing procedures. You can see how those were exploited to move monies to places that it should not have gone. So I think the government is in a process of reviewing those audits, certainly for the prosecution side but for the reform side,” he said.
“I think they need to move forward expeditiously with the reforms to begin to ‘plug the holes in the bucket,’ as my mother would say. That allowed all the state resources to bleed out… and there are a number of other things that needs to be looked at,” Hunt declared.
The US Embassy official also highlighted the discussions with the current administration on the establishment of a sovereign wealth fund (SWF) which Washington supports. According to Hunt, the United States believes that the SWF is a good policy to have even if there are no oil revenues since finances can be garnered from the country’s other extractive industries.
“I am optimistic the government will be moving forward to establish a sovereign wealth fund to ensure the revenues are there not just for the current generation, but for future generations and to ensure that the money doesn’t inadvertently crowd out other sectors of the economy,” he said.
“We all know about the infamous Dutch disease which in civil terms means that if you have all of this money flowing immediately into the economy, it’s likely to distort exchange rates, crowd out other productive sectors of the economy. So ensuring that it comes into your economy in a systematic manner in quantities that can be absorbed by the current economy is certainly important,” he declared.
Technical assistance
Washington has also had talks with Georgetown regarding the provision of technical assistance as it prepares to sign up to an extractive industries transparency initiative.
“Guyana needs to be a member of this international club, first and foremost because it will provide people like you, media and people in civil society, with actual numbers in terms of how much money is coming into the government coffers on an annual basis. It therefore gives you the ability to ask the hard questions; ‘You received all of this money, what happened to it?
We know this is how much you are supposed to get from the bonus payments of the contract. Where did it go? How did you spend’,” Hunt said.
“We have seen globally that having that information is critical to having you play your watchdog role over the government,” the American diplomat said.
Another critical element of ensuring transparency, Hunt said, is the establishment of “the long overdue” Public Procurement Commission.
“I hope we would see the parliament moving forward with naming the members of that commission so that we can begin the process of depoliticising the procurement system and making sure the Guyanese taxpayers are getting the best value for money on whatever the government is purchasing. There is no question there is a long list of things that has to be done because of the timelines we are talking about. I think the government understands the importance of doing these things. My assessment is that they have begun to put the procedures in place,” he said.
Care and interest
“My hope is that the Guyanese bureaucracy will move rapidly to bring these things to fruition so when you do begin to see money, you know that money is going for the development of the country,” he added.
Hunt pointed out that the US has a long history of collaboration on myriad issues with Guyana and this country remains one of the leaders within the Caribbean Community (Caricom) while it also has a very active US immigrant community. He said these ties ensure that the US cares very much about what happens within the Caribbean and there should be no concern that oil has caused this profound care and interest.
“I wouldn’t want to overstate and suggest that the oil industry has transformed relations. I think it adds a new dimension to the relationship. I think it brings increasing importance to certain elements that we have not historically had a lot of discussion on. Certainly, it has raised the need to look at corruption, anti-corruption, procurement, EITI, Sovereign Wealth Funds in ways we weren’t discussing previously,” he said.
“I don’t think it’s been that it has suddenly put Guyana on the map so to speak. I think Guyana was already on the map with most policymakers thanks in part to your very active diaspora community that lives in the United States but also the other forms of longstanding collaboration that we have had,” he added.
