Melinda Janki is an attorney-at-law practising in Guyana and an international lawyer who has worked in over 20 countries.
The Renewable Energy Institute in England recently came up with the marvellous idea of a “solar-mechanical energy-generating wheelbarrow system” by which a wheelbarrow would generate electricity as it was rolled along. The rationale was that the electricity could then be used to provide lighting so that children could study at night, “thereby avoiding all forms of impaired development that may have emanated as a result of the use of a kerosene lamp.” The recipients of this new technology will be traders in Edo Central District, Edo State. Embarrasingly, I had to look up Edo State. For those as ignorant as me, it is in Nigeria. Yes, Nigeria. The same Nigeria that has been producing oil since 1958 and is the largest oil producer in Africa. So, it is only reasonable to ask why doesn’t Nigeria supply (free) power to its own citizens?
The answer is that oil/gas do not make you rich in the Global South. The extraction of oil/gas from the Global South is structured to enrich the foreign oil companies and their in-country stooges, to impoverish the mass of people who own that oil/gas, and to undermine the rule of law so that citizens cannot look to the law to protect their fundamental rights and freedoms. Angola, Equatorial Guinea, Nigeria, Gabon, Sudan, Cameroon, Chad, Republic of Congo, are just a few examples of the mass poverty and corruption that oil/gas inflict on Global South populations while the ruling elites became staggeringly rich and spend without restraint. Gabon was at one time, the world’s largest per capita importer of champagne; about a third of the population live below the poverty line.
Oil/gas exploration and production in the Global South depend on exploitation of the people. But it does not stop there. In ‘How Europe Underdeveloped Africa’, Guyana’s great scholar and historian, Dr Walter Rodney, who was assassinated in 1980, pointed out that “Oppression follows logically from exploitation, so as to guarantee the latter.” The current violence in Cabo del Gado, Mozambique, is linked to exploitative gas expansion. In Indonesia, BP pays security forces to protect its gas interests from the Papuan peoples. These gas interests are located in West Papua, a territory illegally colonised by Indonesia in the 1960’s. Some readers might just remember Benny Wenda, a Papuan leader who visited Guyana some years ago, as my guest. Nigeria executed Ken Saro-Wiwa and other members of the Ogoni people for seeking to protect their homeland from destruction by Shell. Closer to home but further back in time the Venezuelan Minister Juan Pabo Perez Alfonso, called oil the “devil’s excrement”. In the 1970’s, he warned that oil would destroy Venezuela. Today Venezuela, which has the biggest oil reserves on earth, is an economic basket case.
Even rich countries such as Saudi Arabia, Qatar, Iran, Iraq, the United Arab Emirates are not successes. They are repressive and undemocratic regimes. There is more freedom of speech in Guyana and more respect for human dignity. How many thousands of Indian workers have died in Qatar to construct the World Cup stadiums?
No one has yet come up with an example of a Global South country that is better off as a result of oil/gas. The World Bank likes to tout Ghana as a success story. But Ghana has been paying billions of American dollars for gas it does not need under a gas to shore project known as Sankofa. That is a success for the foreign companies who get the cash and for the World Bank which forced the deal on Ghana but it is not a success for the Ghanaian people. The Ghanaian politicians would have done well to remember Kwame Nkrumah’s observation that, ““Investment, under neo-colonialism, increases, rather than decreases, the gap between the rich and the poor countries of the world.”
As the Guyana government recklessly pursues its version of a gas project, the people of Guyana are in danger of finding themselves with a similar unconscionable arrangement. Fortunately it can be stopped. The gas project is almost certainly illegal. If it is allowed to go ahead it will benefit Esso but not Guyana. The government has failed to produce a single credible justification or even a minimal business case in favour of this dangerous, expensive gas project. On the contrary, the Government’s sudden announcement of solar panels for Essequibo, Berbice and Linden underscores the complete stupidity of doing this gas project. Why not put in solar everywhere?
How long will it take for people in Guyana and in the Guyanese diaspora to understand and face up to the unpleasant truth that oil/gas benefit the Global North not the Global South? Guyana is in the Global South. Guyana’s production sharing agreement (Petroleum Agreement) with Esso etc. is one of the most exploitative and abusive in the world.
As the Vice-President so eloquently stated on Friday 21st December 2018 in the National Assembly (when Leader of the Opposition), “Our incompetent Government trudged in there unprepared and stuck us with a contract that would harm us for decades into the future. They sold our patrimony…”
This contract that will “harm us for decades” will not make Guyana rich. This contract that has sold our patrimony cannot make Guyana rich. On the contrary it is going to give ExxonMobil, Hess and CNOOC billions of dollars while leaving Guyana with a ‘small-piece’ and significant economic risks.
The Petroleum Agreement was signed 6 years ago. But there are still conflicting views about what it means for Guyana. The Petroleum Agreement is badly written and hard to understand. But the deal itself is simple. Guyana owns 100% of the oil. Esso, Hess and CNOOC agree to produce the oil. As the oil is produced they take 75% of the production to cover their costs. Then they take another 12.5% of the oil production as their ‘profit’. Guyana gets the remaining 12.5%. In other words, Esso, Hess and CNOOC get 7 times what Guyana gets. This is spectacular ‘eye-pass’.
There seems to be some confusion about how the cost recovery works. Esso, Hess and CNOOC get back 100% of their costs. Not 75%. The Petroleum Agreement states quite clearly that they get back 100% of their costs from Guyana’s oil. There is no cap on the costs. Esso, Hess and CNOOC spend what they want and send the bill to Guyana. If they look for oil, Guyana pays their exploration costs. If they spend billions of US dollars on a dry well, Guyana bears those costs. The billions of dollars for the FPSOs will be paid from Guyana’s oil.
There is not enough oil to pay off those costs right now so they have get it back bit by bit. The 75% that people talk about has to do with the rate at which the oil companies get back their costs. They get back 100% of their costs. But they can only take it out at the rate of 75% of production each month. Obviously this is not enough so they have to roll over the rest of the costs to the next month, and the next and the next. This arrangement will continue until Esso, Hess and CNOOC have recovered all of their costs. Since they keep on spending billions of US Dollars, and the Guyanese Government keeps on granting permits and licences, Guyana will wait a long time to get more than 12.5%. That day might never come.
The world already has more oil than it can burn. There is no need to look for new oil or produce new oil. There is a significant risk that Guyana’s oil and gas will end up as stranded assets – worthless because nobody wants to buy them. The oil price is now about US$100+ per barrel thanks to Russia’s invasion of the Ukraine. Does Guyana really want to stake its future on the atrocity of war? In 2020 the oil price dipped below zero as a result of the pandemic. Nobody saw it coming. What else are we not seeing? Who still wants to bet Guyana’s future on oil and gas?
Esso has just declared a profit of G$132Bn. Under the Petroleum Agreement and a tax order it appears that Esso will not pay tax on its profit but the matter is in court. The Petroleum Agreement also says that Guyana’s 12.5% share is to be treated as if it includes tax from Esso and the Guyana Revenue Authority has to issue a receipt. Meanwhile the Government will not lift a finger to ease the tax burden on the police, army, health workers, teachers and all the masses of people who are struggling to build a decent life for themselves and their families. President Ali recently announced that Cabinet supports a minimum wage of G$60,000 for private sector workers. As the cost of living goes up thanks to oil, it would be useful if President Ali and his Cabinet could drop their salaries to G$60,000 and show the workers how to live on that amount of money.
Esso says they have invested G$3trillion in Guyana since 1996. However Esso gets back all of its costs. It claimed that it had pre-contract costs of about US$460 million; that is, costs from 1996 plus other costs until the new Petroleum Agreement. Esso gets back those costs from Guyana’s oil. Once again the people of Guyana pay and Esso makes the money.
Esso’s environmental permit for Liza 1 was recently renewed. It was based on the environmental impact assessment of June 2017 which said that Esso would discharge 4,000 barrels of sewage every day into Guyana’s pristine marine environment. The new environmental permit does not stop this. Over the proposed life of Liza 1 that will come up to about 1.4 billion gallons of sewage. Liza 1 is estimated to have about 1.4 billion barrels. Guyana would get roughly a gallon of sewage for every barrel of oil In Liza 1. That is possibly the best indicator of what this deal means for Guyana.
I wonder if I could get an upgrade to a solar wheelbarrow.
