Acquiring more from previously signed oil and gas contract, a plus – Minister Jordan

Government Ministry of Finance News

DPI, Guyana, Wednesday, August 16, 2017

The fact that government was able to obtain more in the oil and gas contract deal signed between Guyana and ExxonMobil should be considered a plus. This is according to Minister of Finance Winston Jordan. Speaking at a press conference on Monday at his office, the Finance Minister stated, “Let’s be blunt. We inherited the contract from the previous government. We could jump high, jump low. There is no basis for renegotiating a contract we inherited.”

Minister of Finance, Winston Jordan

The minister reminded that several factors needed to be considered, such as the fact that previously no one wanted to get into business with Guyana given the issues with “our neighbours next door.” He also made note of the level of financing that has to be available to ExxonMobil for it to conduct drilling of that magnitude. “And I believe the further out they go will be more depth which will require even more technology.”

Once located at the said depths, another set of advanced technology has to be used to bring the oil to the surface, the minister said. He explained that the deepest ExxonMobil has ever drilled before is said to be in the Gulf of Mexico and that does not compare to the depth at which it has gone offshore Guyana.

He said, “We can talk till the cows come home but in going forward, we can say that discoveries not covered by this contract, we have a basis to drive a harder bargain and negotiate for more. When people go where angels fear to tread, it’s a risk. But when people are going to go (that length) it’s a risk and private people look for reward.” Minister Jordan gave an analogy, positing that someone can choose to stand up in a gambling den and look on all night. However, he noted that at the end of the night, that person will be no richer or poorer. “But if I go with the big boys or girls and put my millions, at the end of the night I can be X millions poorer or Y millions richer, it depends on how I take the risk.”

He drew attention to the fact that despite invitations to drill for oil, in years past, “very few took it up.” Those who did take up the offer did so mainly on land, not so much in deep water, he added. The Minister continued, “When you put all together it is not whether we got a good deal or bad deal or whatever… we got a deal.” Using another metaphor, Jordan said, “Hindsight will always be 20/20, but at the time you are making a deal it depends on what cards you hold and what the other person holds. If you think you have the best hand, then you can drive the bargain. At the time when this deal was put together by the last government you may have to ask yourself, ‘what cards did we hold? Did we know anything was under there?’

“The positive that we can take away from this”, Minister Jordan stated, “is that we now have resources coming … that could finally put Guyana on a path of sustained high-end development, where two percent and three can become things of the past…. There is also the need for balanced growth, whether sectorally or regionally or otherwise…That is what I would like to see.”

There are at least three sources of income, the Finance Minister explained., “These are with-holding taxes, profit oil and royalties. Those, in terms of the numbers, are fair sized. He said it makes no sense continuing to waste time lamenting on whether or not Guyana may have received a good or bad deal. The Minister said that what is now important is for Guyanese to look to the future with hope for development. The Minister told reporters, “It is not for me to be happy or unhappy.”

Jordan said that once Cabinet approves a document, all members have a collective responsibility. “If you do not like something (a Cabinet decision) and you are passionate about it, you have the option to resign. It (the agreement) has been discussed, received and approved by Cabinet. We have gone beyond that.”

Government has already started to put measures in place to have a Sovereign Wealth Fund to utilise profits from the sector in sustainable manner, for the future.

 

By: Paul Mc Adam