Guyana Oil

October 27, 2018 - 329 views

How many times have we heard, “It’s not what you have, it is what you do with it.”

Well, this was recently emphasized by Economist and oil and gas consultant, Andrew Bauer.

During a recent interview with Kaieteur News, Bauer, of the Natural Resource Governance Institute (NRGI), pointed out that Guyana is yet to position itself to realize positive transformation from its oil money.

He stressed that Guyana needs to quickly decide what it wants to do with its oil money before there can be real prospects of success.

Bauer said that there are, at least, three fundamentals needed to be adopted by a nation in order for oil to be a blessing and not the dreaded curse it is in so many jurisdictions.

These fundamentals are a National Development Strategy—that is feasible and carefully tailored to unlock the country’s potential; a fiscal rule “that can smooth expenditure”; and procedures that can, as much as possible, minimize tax avoidance by oil companies.

Currently, Guyana has none of these fundamentals in place. But, according to Bauer, “They are being worked on.”


Development is usually guided by a plan. Indeed, Guyana has such a plan. However, the National Development Strategy is outdated and dates back to the previous administration. The coalition government is yet to produce such a plan.

Bauer is not the only one to have stressed the importance of a National Development Strategy.  United Kingdom High Commissioner, Greg Quinn, was keen about the need for such a strategy.

The envoy said, “If you are going to make this work, then you need to have an overall statement of what you want and where do you (government) want to see the country 20 or 25 years down the line.”
He said that once the main pillars are erected, “then everything sort of comes down from it, in terms of what needs to be done to highlight the specific areas of development.”

Attorney at Law and oil and gas consultant, Charles Ramson, had spoken to this too. Ramson said, “The Green Paper constantly references the Green State Development Strategy which has not even been completed yet. The fundamental and basic truth is that your development strategy should be the first thing a government aggressively pursues the moment it gets into power because it outlines its vision.

We are three years in and there is no development strategy so we are essentially marking time. The strategy should be completed first so we can know what our development priorities are and based on that we can know what type of SWF we should have and establish a fiscal rule is adjusted over time as you complete those priorities.”


Then, there is the absence of a clear fiscal rule that can actually smooth expenditure.

Bauer thinks that Guyana’s fiscal rule for the Sovereign Wealth Fund, as outlined in the Green Paper, is too complicated.

Bauer is not alone in his views on this either. Ramson had spoken about this too. He called the rule, “messy, complicated and does not match its co-mingled funds framework.”

Ramson said, “We see abbreviations like EFSA, ESA, BPR, FSA etc. being introduced and asking the public to grasp its complicated formula. The rule must be simple enough for the public to be able to understand so they could hold the government accountable. This has been one of the success reasons for the Norwegian SWF.

“A Norwegian taxi driver can tell you what their fiscal rule is.”

He continued, “Second, the premise of the fiscal rule introduced in the Green Paper is based on oil production. In reality, it does not matter how much you produce – what matters is how much money you get – which is production times price.

If you produce 100,000 barrels and the price per barrel is $100 and you produce 125,000 barrels but the price per barrel is $75 which one is higher? Finally, the NRF mentions placing revenue from other sources like mining and forestry into the NRF but no reference is made to either of the two sectors in the operation of the rule itself.

“All we see is the production of oil. In fact, forestry and mining is not mentioned anywhere else in the Green Paper. It is as if someone said this sounds like a good idea so let’s just put it without examination of its practical application. It’s window dressing.”


Bauer said that it is imperative that Guyana secures strict tax avoidance strategies so that it can get every cent owed to it by oil companies.

He stressed that this measure is key and the revenue must first be secured before it can be used. However, the Guyana Revenue Authority (GRA) is now gearing to learn how to combat tax avoidance.

Representatives of the International Monetary Fund (IMF) are currently here working with GRA Officers to get them familiar with tax avoidance strategies and teach them how to combat this for the good of the financial wellbeing of this country.


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