Vice President Jagdeo defends incentives given to oil companies
Vice President, Dr. Bharrat Jagdeo
Kaieteur News – The Vice President, Dr. Bharrat Jagdeo, emphasized on Kaieteur Radio why it is important for oil companies to get government incentives, in exchange with Kaieteur News publisher Glenn Lall.
They discussed that and several issues on Guyana’s Oil and You on December 23 last year, curated by Kaieteur News’ Senior Journalist Kiana Wilburg.
Dr.’s explanation appeared. Jagdeo after he admitted that the tax regime given to ExxonMobil for its Stabroek block operations was too liberal, as it effectively requires the company, its partners, affiliates and subcontractors to pay nothing taxes.
This has led to a situation where the Guyana Revenue Authority (GRA) is persecuting local businesses, as the country battles a pandemic, for taxes owed they are struggling to pay, while oil majors are worth billions of dollars operating tax-free.
“I know from a country perspective we need to get more,” said the VP, after committing that future petroleum deals would include fiscal regimes that are very different from one Stabroek block Share Production Agreement (PSA) ).
Despite this, Dr. believes. Jagdeo said it was important to incentivize oil companies because of the size of investments they bring to these oil developments.
He said the total assets in Guyana’s banking system amounted to $ 1.1 trillion, or about US $ 5.6 billion.
Compared to the scale of investments being made by Exxon, the VP noted that Liza’s Phase One project has an estimated cost of US $ 3.5 billion, while Liza Dau is estimated at US $ 6 billion and Payara is US $ 9 billion. The total cost of these three is estimated at US $ 18.5 billion dollars.
“If we look at the three developments, that’s close to 20 billion,” said Dr. Jagdeo, comparing it to the money in Guyana banks.
“Developing an offshore facility or any oil and gas industry far exceeds the capacity of the country … Where are you going to get that money if you do it? Do you not understand its scale? ”
“Often in economic terms, you have to look at the transformation of a country and the scale of unstable capital needed. So I’m only highlighting this scale for the oil and gas industry. Exxon only made three projects, leaving all of the others, eight times more than all the deposits we have at each of our banks. So if you want those resources developed, you have to motivate the country first but protect the country … ”said the Vice President.
The African Energy Center (ACEP), thanks to policy, has advised developing countries to make them more prudent in determining tax waivers for companies in their extractive sectors. ACEP asserts that those governments need to establish a foundation for exemptions, through scientific analysis of what they will cost the government and how they are expected to benefit the country in return.
The Center noted that tax exemptions are generally granted with an expectation that it would return employment increases, location-specific investment commitments, attraction of capital to competition and efficiency of a domestic market, and investments in specific economic sectors or activities as part of industrial development strategy. .
He said a cost-benefit analysis would objectively determine the associated costs and benefits before allowing tax exemptions. There is no evidence to suggest that Guyana did anything of the sort.