Dear Editor,
I refer to `Payara review will take account of concerns raised by local agencies – Bharrat’ (SN Aug 17). When I was asked for my opinion as someone who studied oil economics, I could not give a response other than to say I welcome “a review” as indeed every Guyanese and your paper. But from the outset, I stated to those who solicited my opinion that it was not clear what “the review” is all about. What exactly is being reviewed? Is it auditing or verifying the contract or something else? Every aspect of the production and the agreement needs to be reviewed and the financial and development benefits for Guyana. Do people understand the scale and magnitude of the process that needs reviewing? As a developmental economist, I am interested in the proceeds. There are too many unanswered questions relating to this review. And I agree with Mr. Jagdeo that it should be expedited so that production can commence earliest.
The journalists did not ask the right questions. They have not acted like investigative or inquisitive or forensic reporters. The important end result about the ‘review’ is: “Would it change the one-sided contract that was negotiated for Liza 1 and II or the Stabroek blocs or is that the precedent for all oil discoveries and recovery of oil? If the country won’t get several times the 2% royalty, then what is the review about? Money is the bottom line for a destitute country like Guyana. And off course safety (oil spill) or environmental impact. If we don’t get an increase in revenue then we would have wasted more money. Approval of Payara provides an opportunity to substantially increase royalty and profit percentages once a proper review is undertaken. Skill of Guyanese negotiators is key for increased benefits from any review of Payara and or all other contracts.
Legitimate questions are asked by some in the media on the competence and expertise of the (Canadian) team that is doing the review. The team may not have formal education in energy but seems to have experience on legal matters pertaining to energy. It is a legal oriented as opposed to a technical oriented team as both reviewers are lawyers rather than energy experts. That is the team that is approved by Canada, the donor country as requested by the aid recipient, Guyana government. Government does not have much choice in the approval of the reviewer.
It seems that the previous government paid a huge sum of money of some US$387K for the original review by Bayphase and the Canadian government also chipped in with an unknown ($ amount) grant to cover the fee for the second review. Those of us who study economics would know that the aid giver, Canadian government, has to give approval on the selection of the reviewer. Foreign aid has strings attached, one of which is to use the services of the donor country’s nationals or corporation. All donors have that condition.
Alison Redford, who is approved by the Canadian government last week, heads the review team. She is a former politician and a lawyer. She is not an economist who would have studied oil economics. She worked on constitutional and election reforms and on Canada’s foreign policy and has some background on drafting legislation on gas. There is no mention of her being an oil or gas or energy expert. Another member of the team Jay Park is also not an energy specialist or economist although he served briefly as a deputy minister of energy of a provincial (not national) government. But one does not have to be a specialist in energy to review the contract; hardly anyone in Guyana is an oil expert. It is expected both would act in the best interest of their client, the Guyana government.
A relevant question is what is the background of Bayphase that was initially hired by the coalition to do the review? What is its specialization? What work did it do? Its website is like that of an underdeveloped village organization. There is no oil expert in that team. They are lawyers and politicians, not even economists. As an economist cum political analyst, red flags are raised.
It would be recalled that US$300K was used to pay a UK firm IHS Markit for an audit of the US$460M pre-contract cost. Chris Ram claimed it was over billed by some US$92M. That audit has still not completed some eight months later.
I applaud the media’s focus on the oil contract. Morally, ethically and legally, according to international standards, Guyana should get some 12% in royalty and more than half the profits of the oil proceeds. Instead Guyana gets 2% royalty and 12.5% profit which is reduced because Guyana has to pay all of the oil companies’ expenses including for food, drinks, hotel, and taxes. Every percent increase in royalty or profit could see an increase of up to US$10 B for Guyana. The media should get clarification on what is being reviewed and press the case for an increase in royalty for Payara. The country is losing billions in American dollars annually from the bad negotiations of the previous regime.
Yours faithfully,
Dr. Vishnu Bisram
