From 12.5% to Nearly 40% – How Long Can the Good Times Last? - Part 3

(Kaieteur News) – Having promised renegotiation and abandoned it on taking office, President Ali offered the country a substitute. The 2016 Agreement would stand, but it would be properly administered. He argued that as leader of a country governed by the rule of law, he was bound by the legal axiom of sanctity of contract. What he offered instead was that the whole of the operations would be thoroughly scrutinised, the finances of the oil companies subject to strict audits, and the national interest protected by good management. That was the bargain put to Guyanese in place of the one they were promised. Parts I and II asked how much Guyana receives from Stabroek and how long the present position can hold. This part asks what becomes of the money once it arrives. Six years on that bargain can be tested, and the last fortnight has tested it.

On 18 August, at a press conference at the Office of the President, Ali announced that Guyana’s share of Stabroek Block oil had risen from 12.5% to 39.8% because the cost bank had been recovered two years early. He described the earlier position in these words: “In terms of barrels, 75% of every hundred barrels produced went to cost recovery.” Seven days later the Ministry of Natural Resources published in the pro-Government Guyana Times a letter headed “Guyana’s profit oil share has always been 50%”, which clarified that the 39.8% “is our share of every single barrel produced, before costs are taken out.”

The letter, which bore no signature, disingenuously sought to blame the politician Sharma Solomon for causing confusion. In fact, it was correcting the President, who was as careless as he was uninformed. But the Ministry was not much better. Take its statement that the 75% cap only “limits how fast [costs] can be repaid”. It does nothing of the sort. It is the ceiling on costs which may be claimed in any one year, or put another way, the floor beneath profit oil in that year. Whether the contractors reached that ceiling in any given year, and therefore whether 75 barrels in every hundred did go to cost recovery, is a question of fact which neither the President nor his Ministry has answered, because neither has ever published the figures.