The new PPP/C administration on Wednesday announced that it will immediately engage the oil & gas companies in better contract administration/ renegotiation but gave no specifics even as it indicated that it will establish an “arm’s length” Sovereign Wealth Fund (SWF) insulated from political interference.
The announcement was made during the reading of the emergency budget to the National Assembly by the Minister of Public Works Juan Edgill.
According to Edghill, the government will approach the oil & gas sector in a national, non-partisan manner and it is expected to “bring not only significant financial resources and enormous transformational opportunities, but also many challenges.”
“There are many examples around the world where developing countries have obtained windfalls from oil and gas but have eventually ended up poorer than before,” the Minister cautioned.
Consequently, central to the administration’s strategy in the sector will be: a framework for proper management of the resource; transparency and accountability; and, securing benefits for all Guyanese.
The government also plans to define by legislation how funds will flow from the SWF into the budget, and the purpose for which they will be used; ensure that expenditures are transparently determined and go through the parliamentary process, and establish a model Production Sharing Agreement (PSA) based on industry-wide standards and best practices. The purpose of this, according to the minister, is to ensure that Guyanese receive maximum benefit from these contracts without disincentivizing foreign investors in the sector.
The administration will also focus on training of thousands of Guyanese at every level to create a national core of managers and a workforce to chart the future direction and effectively manage the sector.
And to prevent oil money from being squandered or stolen, Edghill said the government will: uphold the Santiago Principles of transparency and accountability, and the Extractive Industries Transparency Initiative (EITI), criminalise non-disclosure of receipt of funds from oil revenues, ensure annual reports from the government are laid in the National Assembly detailing oil revenues and expenditures, ensure there are regular audits, and ensure that civil society is involved in a central role to monitor compliance and accountability.
“Mr. Speaker, the oil resource belongs to the people of Guyana. We will ensure that oil revenue works for all Guyanese, and is spent on improving people’s lives and in support of job creation,” Edgill assured.
To this end, he said the oil revenue will be directed at support for job creation, world-class education, health care for Guyanese, social and economic infrastructure, targeted cash transfers to Guyanese particularly the elderly, children, the poor, and other vulnerable groups, strong local content for Guyanese with legislative safeguards, savings for future generations, and tax reduction for Guyanese businesses and individuals.
Meantime, the allocation to the Guyana National Bureau of Standards (GNBS), which has the responsibility for the metrology on the floating production storage and offloading (FPSO) vessel, has been increased from $298.6 million to $586.5 million. This is to ensure that the bureau is fully equipped to execute this oversight responsibly.
