Dear Editor,
I write about various headlines about oil and where the earnings from oil go. For ease of reference, I refer to two headlines in yesterday’s (October 1st, 2024), Kaieteur News.
Let’s start on the cover – “Guyana should have received U.S. $ 10 billion from oil to date but only received U.S. $ 4.4 billion.” I am sure that the amount of U.S. $10 billion is arguable; whether so or not, perhaps we should rejoice that we received directly U.S. $4.4 billion, when without oil we would have received nothing, zero. Let’s feel good about the U.S. $ 4.4 billion. If we have troubles absorbing the US $4.4 billion according to some reports, what more troubles we would have had in absorbing U.S. $10 billion! Sometimes there could be too much of a good thing.
The question about what is fair in different situations, in different countries around the world, is very often politically vexatious. There is the second article reappearing in yesterday’s KN entitled, “Big US Oil Companies reveal massive payments to foreign governments.” I first saw that headline a day or two ago. I wondered whether it was another article on massive corruption, but reading it yesterday, it is something quite different. The article is essentially complaining that the US Companies are paying proportionately more to foreign governments for oil recovered in foreign countries, than they pay to their own US Government for oil recovered in the US. If we were in the place of the US Government, we might have been getting less than the US $ 4.4 billion!
Reflect on the two paragraphs below from that article:
(i) “the truth is here in the US we get one of the worst deals for the extraction of our natural resources” said Michelle Harrison Deputy General Consul for Earth Rights International an environmental advocacy group.
(ii) About 90% of Exxon’s nearly US $ 25 billion in global payments went to foreign governments in 2023, even though a quarter of Exxon’s global exploration and production earnings comes from the United States.
There seems to be media, civil society, and NGO groups in the US who are in essence arguing that Foreign Governments are getting much and the US Government should be getting more. It puts me in memory of our negotiations with SaskPower about 1997, for a Partnering agreement with SaskPower for their investment in and development of our electricity corporation. Some members of the Saskatchewan media and the Guyana media seemed to have developed close friendly relations during the months of negotiations, however I was dumbfounded when the outline of the prospective, delicately balanced agreement was released to what appeared to be a constructive, all-together media group. The Canadian media wrote articles which seem to say, “look what our SaskPower people have allowed that third world country to extract from them;” and the Guyanese media wrote – “look what our government people are giving away to those exploitative first world people.” I was dumbfounded, and more so, when from time to time, later, I heard some of our media commenting, saying that the SaskPower Agreement was probably the best we could have had.
One fact that tempered my feelings at the time, was that few if any of us, our media, commentators and civil society had any nearly sufficient, holistic knowledge and experience in what is required for the provision of a good electricity service. It is natural that we would want to protect ourselves and our country – to do so however we need to know what is prevailing, what is the best deal there can be. It seems that we have been in much the same situation with oil. I would have preferred that instead of the many articles “bad mouthing” oil, we had articles on the history of the oil industry: how it got going in Pennsylvania in the USA in about the 1850’s with people beating pipes into the ground where oil was oozing up. This is what we should have been focusing on, from that start to where we are now about 170 years later; where Exxon has had to look about a mile and a half through the water to the bottom of the sea, and a further mile and a half into the rocks to the oil-bearing strata; and had the knowledge to now recover the oil from such a depth in such a location; and was able to accumulate, and riskily venture that money, the capital, to do it. I would prefer to have my people feeling challenged, learning and knowing how these things are accomplished – it is in becoming knowledgeable and capable and accomplishing that we become empowered. Also, when we know, it is easier for us to reach agreement and have satisfactory partnerships with others, and with less than a million people we Guyanese need to become good at making partnerships with others in this world of eight billion souls.
Allow me to point to one other matter for us to keep under observation. I have thanked Professor Hunte before for many of the tables on the oil industry which he has presented. The trouble is that we see different lessons in the same tables. In one table, comparing costs of oil production in various oil fields around the world Professor Hunte shows that in Saudi Arabia, and Iran, from where all the oil the world needs could be recovered, production costs are about US $10 per barrel, while production off-shore Guyana is put at about US $30 per barrel. I wondered why the cost offshore Guyana is not more like that of the North Sea, approaching US $40 per barrel (no doubt compensation and services costs figure therein). With the alarm about Climate Change, suggesting that the use of fossil fuels may be ended around 2050, one can imagine that there might well be a shake-out in oil prices at some time. Energy prices may stay high, limited by the cost of alternatives, but payments to the wellhead will fall as money has to be put to capture and store the CO2 released, and/or to pay for Carbon credits. I can tell you that I have noticed some articles recently which hint at (i) a coming shake-out and fall in oil prices, (at the wellhead), and (ii) oil from offshore Guyana now contributing to dampening oil price increases. A policy of “pump baby pump,” “make hay whilst the sun shines,” may well be the correct policy for us Guyanese, and Guyana, at this time.
May we enjoy the receipts from Exxon’s recovery of oil off our shores, whilst we may, and hurry to transform our country and ourselves with our investments in infrastructure, education and health; in our country and in ourselves, so that when our world parts with oil, we, Guyanese in Guyana, will be able to earn and provide ourselves a better life, and extend a helping hand to others.
Yours faithfully,
Samuel A.A. Hinds
Former President and Prime Minister