By Antonio Dey | HGP Nightly News |
GEORGETOWN, GUYANA — Economist and former Guyanese Ambassador to South Africa, Professor Kenrick Hunte, is calling for a comprehensive institutional upgrade to Guyana’s petroleum governance model. He argues that structural ring-fencing alone is insufficient without a continuous, real-time monitoring system that can audit capital investments, operational lifting costs, gross revenues, and net field profitability.
Speaking with HGP Nightly News, Professor Hunte emphasized that as Guyana approaches a daily production milestone of 1 million barrels of oil per day across the Stabroek Block, the state must modernize its fiscal and regulatory oversight to ensure the nation receives a fair and transparent return on its sovereign natural resources.
Real-Time Monitoring and Project Cost Auditing
Professor Hunte outlined why post-facto oversight leaves the country vulnerable, calling for real-time data integration on offshore extraction platforms:
- Break-Even and Ring-Fencing Metrics: Ring-fencing ensures each development project (such as Liza Phase 1 & 2, Payara, Yellowtail, and Uaru) carries its own capital recovery ledger, allowing the state to set exact break-even thresholds and quickly move fields into higher profit-sharing tiers.
- Low Production Costs of Sweet Light Crude: Highlighting that Guyana’s offshore deposits consist of high-grade, low-sulfur light crude—which is significantly cheaper to extract than heavy crude blends found in neighboring Venezuela—Hunte questioned high operational cost estimates, asserting that real lifting costs should range between $10 and $20 per barrel.
- Capital Cost Verification: With an estimated $55 billion in cumulative capital investments and development expenses tied to current and future projects, Hunte stressed that the state must verify expense pools using direct engineering and accounting data rather than waiting years for retrospective audits.
“What ring-fencing means is you isolate new projects and the capital investments put in. You can then accurately determine what we call the break-even level,” Professor Hunte explained. “Guyana’s oil is light crude, making it among the cheapest in the world to produce compared to heavy crude. Producing a barrel here is not $50 or $60—it is much lower. But we must have the real-time numbers and actual data on the ground to back that up.”
Contract Renegotiation and Political Commitments
Addressing the administration’s stance on the 2016 Stabroek Production Sharing Agreement (PSA), Professor Hunte referenced statements made by senior government leaders, including Vice President Dr. Bharrat Jagdeo prior to the 2020 general elections, in which renegotiation of extractive contracts was publicly advocated:
- Past Campaign Assurances: Archival campaign footage from 2020 recorded the leadership assuring citizens that non-oil and natural resource contracts would be revisited following the March 2020 polls to maximize domestic benefits.
- Call for Realistic Engagement: Professor Hunte urged the administration to address the policy shift and leverage Guyana’s increasing production scale to negotiate ring-fencing provisions and enhanced terms for upcoming offshore licenses before approving new Field Development Plans (FDPs).
Balancing Petroleum Wealth Against Fisheries and Food Security
Beyond fiscal mechanics, Professor Hunte raised environmental and socioeconomic concerns regarding the impact of continuous offshore exploration and seismic activity on local artisanal fisheries:
- Impact on Marine Ecosystems: Persistent reductions in domestic fish catches directly threaten the livelihoods of coastal fishing communities and reduce affordable protein sources for low- and middle-income households.
- Holistic Economic Accounting: True petroleum profitability must account for the indirect costs imposed on traditional marine sectors, ensuring that national resource extraction does not undermine domestic food security.
