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PPP threatens to “examine” oil-profits accord with Exxon-Mobil; pours cold water on Sovereign Wealth Fund

Opposition Leader, Bharrat Jagdeo

The People’s Progressive Party (PPPC) Saturday threatened to revisit any deal with government for American oil-giant, Exxon-Mobil, to pay Guyana oil profits ahead of commercial production.

“Exxon-Mobil has to be forewarned that if it comes to Guyana and engages in any underhand dealing with this government that we are going to examine all of those,” Opposition Leader, Bharrat Jagdeo told a news conference. “If this materialises then the PPP, when it resumes office in four years time whenever the elections are held, will be forced to consider whether this is a transparent deal and to recognise it because it is borrowing against future receivables when those have not even been developed and you don’t even know they will be realised,” he said.

He also flayed the coalition-led administration for moving to establish a Sovereign Wealth Fund, saying the country’s fiscal and monetary framework does not permit such a facility to stash away some revenues from oil, gold, forestry, precious stones, sand and even water for future use.

No one could immediately confirm that government was interested in asking Exxon-Mobil to pay about US$2 billion profits in advance before commercial production begins in another few years. The matter is expected to feature on President David Granger’s agenda when he meets with the President of Exxon-Mobil early next year.

Reacting to a disclosure by Minister of Governance, Raphael Trotman, the former Guyanese leader told a news conference that a deal to pay upfront profits from oil would not see Guyana being subjected to scrutiny for accessing funds from agencies such as the Inter American Development Bank (IDB).

“If they get two billion (United States) dollars from Exxon-Mobil, it would come into the Treasury they would then not have to go through any of the transparency requirements for using multilateral money,” he said. Those rules could include unilateral selection of contractors rather than tender and feasibility studies.

The Opposition Leader called on government to sign on swiftly to the Extractive Industries Transparency Initiative. The American government has been sponsoring several workshops on that North American country’s transparency model to help Guyana avoid pitfalls of other oil-producing countries and minimize chances of corruption.

Touting the proposed upfront production accord as a “huge” “transparency issue” for the PPP Jagdeo said his party was wary of experiences in other countries where oil companies have paid off government officials to get better deals for producers and other s. “We hope that we are going to avoid this in Guyana but you are not going to avoid it by going this route,” he said.

He questioned why government wanted to borrow against future income that was not necessarily guaranteed because Exxon-Mobil has to quantify the reserves and drill more wells before commercial production begins and what would be the cost of doing so.

The Governance Minister, who is responsible for the Ministry of the Presidency’s Department of Natural Resources and the Environment, has said that the advance payment of oil profits would help Guyana improve the delivery of tertiary education and build the Guyana-Brazil road and other roads to further open up the hinterland.

As Guyana moves ahead briskly with plans to establish a Sovereign Wealth Fund, Jagdeo said such a facility could be created by income from balance of payment surpluses, fiscal surpluses, and excess foreign currency- none of which he said Guyana has. “When he is talking about the Sovereign Wealth Fund, I suspect he is talking about future oil proceeds… A Sovereign Wealth Fund is used to invest abroad in financial assets so that it can maintain the value of the portfolio,” he said.

The Minister of Governance has said that a Sovereign Wealth Fund Bill would be tabled in the National Assembly next year. He has explained that fund rules would determine how much would be saved, withdrawn and on what projects monies would be spent.

The Opposition Leader said Guyana could use Norway or Trinidad and Tobago’s fund legislation as  a model law.