Introduction
As promised, today’s column addresses the final topic in the now long running series (started September 2016) on Guyana’s coming petroleum sector, namely, its fiscal stabilization clause. Such clauses are found in many petroleum agreements/contracts. As promised also, this discussion will be followed with an explication of my proposed Road Map for the spending of the Guyana’s Government Take from projected petroleum revenues.
In an earlier column, (December 9, 2018), I had indicated that, for present purposes, fiscal stabilization “simply refers to the deliberate insertion of a clause in the Production Sharing Agreement (PSA) designed to deal with any future changes in Guyana’s fiscal laws which may occur during the life of the petroleum project.” In that column, I went on to stress, “such clauses are, by intent, aimed at mitigating any risk the Contractor (Exxon and partners) faces, if Guyana’s fiscal law changes to the Contractor’s detriment.” Such detriment, invariably reduces the value of the Contractor’s investment. However, there is also Guyana’s “detriment.”
This task will occupy both today’s and next week’s columns.