‘Absolutely disastrous to scrap Exxon Contract’ – Int’l expert
DPI, GUYANA, Friday, March 23, 2018
The contract between ExxonMobil and the Government of Guyana has been described as a “reasonable deal” by renowned Professor of Economics Sir Paul Collier.
Speaking at a media interaction on Wednesday, March 21, following a high-level ministerial caucus, Collier said it is customary that the first deal is not as fruitful as the proceeding ones.
“What I’d suggest is that you use this as an opportunity to do some more licences over the next three, four years and get some more operators,” he advised.
The expert said that it would be “absolutely disastrous” to scrap the contract at this point. According to Collier, “if you tear this contract up, nobody else will come and that’s the brutal reality”.
Governments, he noted, need to establish credibility with the contracts they sign. He believes that Guyana will receive significant revenue from this contract.
For the first few years the country will not gain as much since ExxonMobil will be recovering its costs, however, Collier said following that a lot will be earned by the country.
This, he noted, is practical and augurs well for Guyana since it gives policy-makers time to further build capacity and establish the necessary institutions, among other systems.
He emphasised the need for the Government to use this opportunity to scrutinize the taxes being paid by the company and not trust that the right amount of taxes is being paid.
Collier said this is important advice that he has given to many governments, citing a case in Nigeria where the oil companies were not being audited and when an audit was conducted the companies owed the government over $300M in back taxes they had underpaid.
The Government, he advised, should build a specialist team to monitor the tax payments by ExxonMobil and other oil companies that will eventually invest in the industry.
As it relates to the establishment of a Sovereign Wealth Fund, Sir Paul said what is need are some institutions with a good sense of checks and balances to manage the Fund.
“Governments change and things happen you [government] need to build a critical mass of citizens in the society who understand why oil-rich countries need distinctive institutions which manage that money and defend those institutions,” he emphasised.
According to the expert, ordinary people are capable of thinking long-term, further emphasising the need for conducting public discourse to guide Government’s management policies.
By: Stacy Carmichael