Guyana now spending excessively more than it earns

Financial Analyst says Govt., ExxonMobil must open up their books to the public

By Gary Eleazar

Kaieteur News – The Government of Guyana and Esso Exploration and Production Guyana Limited (EEPGL)—ExxonMobil Guyana— must open up their books to the people of the country in order for them to obtain a better understanding of what is transpiring with its wealth.

Tom Sanzillo, Director of Financial Analysis for the Institute for Energy Economics and Financial Analysis

This was the clarion call made by Tom Sanzillo, Director of Financial Analysis for the Institute for Energy Economics and Financial Analysis (IEEFA) during an online media engagement to appeal to the local authorities, ahead of the expiry of the Liza I Environmental Permit on May 31, to produce oil from that field in the Stabroek Block.
Sanzillo was adamant that given the track record of the administration and the oil company since it first began operations should the Environmental Protection Agency renew that permit without financial and other reforms, then it was merely rubberstamping the demands of the oil operators.
According to Sanzillo, “the government of Guyana and Exxon (Mobil) must also open up their books so the public can better understand what is going on, if Guyana simply approves the environmental permit without real changes to this deal it would have failed to protect the people of Guyana.”
Addressing the renewal of the permit directly, Sanzillo was adamant that should this be done with “no additional restrictions on environmental and climate related matters and no financial reforms will mean it’s just another rubberstamp of oil industry demands on the country.”
He subsequently quipped “…it’s one addition to a long list of contract abuses that are short changing Guyana.”
Qualifying his calls for greater transparency, additional restrictions and fiscal changes, he pointed to the fact that Guyana this year used up all of its earnings from the oil sector representing profit and royalty being used in the 2022 Budget.
“The new revenues touted by government officials and corporate officials cannot erase the fact that the cost of production is high and mounting…as we see it, every Guyanese resident is on the hook for about US$34B or US$44,000 (G$9M) per person.”
According to the Financial Analyst, the figures cited represent “the amount we know is already owed and there will be a lot more if the production plans go forward as they seem to be.”
With this in mind, he noted that what each resident must pay “is bad enough and what we see in this year’s Guyana budget adds insult to injury.”
Elaborating further, he told media operatives, “the government has been touting growing revenues from the oil field but the revenue had done not in fact help the country to achieve any of the goals it had agreed to with the International Monetary Fund.”
He reminded that in 2019 the IMF and Guyana had agreed to a series of goals that would dictate the way in which the oil money would be used.
According to Sanzillo, there were four key objectives agreed to namely, that the money in the Natural Resource Fund would be used to help firstly close the deficit gap for the country, allow for some new spending, reduce the debt and contribute towards savings for future generations.
Setting a bad precedent from the beginning, Sanzillo pointed out that based on their reviews of the first budget to be funded in part using oil revenues “the revenues did not close the deficit.”
He said new spending did occur with the Budget ballooning by 37 percent but it meant that Guyana also had to go out to borrow US$420M in order to fully finance the entire spending plan for the year. That spending, he said “is not sustainable.”
The new revenues, according to Sanzillo, did not reduce the national debt and neither was there anything left in the account as savings for future generations.
“So far Guyana has received some US$600M and the oil companies have walked away with an estimated US$3.6B tax free.”
Elaborating this point further, he noted that “for every US$1 Guyana gets the oil companies get around US$6.”
He observed too that it was not just about how much revenue is coming in but how much the country is spending and “this year new spending exceeded the amount of new oil revenue, Guyana is spending more than it is taking in.”
Reflecting on Budget 2022—the first budget to be financed in part using oil money—Sanzillo noted that the first year of use is critical since it sets the precedent for how the money will be used in future “and all the precedence in this instance are bad; no deficit closing, excessive spending, increased debt, no contributions to the long term.”
To this end, the Financial Analyst concluded “it’s a bad deal now made worse by bad management and that adds up to each resident owing US$44,000.”