By Antonio Dey | HGP Nightly News|
GEORGETOWN, GUYANA — Former Guyanese Ambassador to South Africa and economist Professor Kenrick Hunte is warning that state and corporate focus on “profit oil” figures is fundamentally misleading, arguing that profits matter only to private shareholders while Guyana’s true national benchmark must be total gross revenue and how much actual value remains within the domestic economy.
Speaking in an exclusive interview with HGP Nightly News, Professor Hunte raised critical questions regarding fiscal retention as Guyana prepares to surpass production of over 1 million barrels of oil per day with the upcoming integration of its fifth Floating Production Storage and Offloading (FPSO) vessel, the Errea Wittu, into the Stabroek Block fleet.
“Colonial Setup” and Delayed Audit Oversight
Professor Hunte criticized the state’s regulatory approach to offshore natural resources, describing the monitoring framework as a lagging, post-facto system that deprives the country of real-time fiscal control:
- Lagging Field Audits: Hunte contended that waiting years after financial close to contest audited expenditure reports fails to protect sovereign interests.
- On-the-Ground Presence: Effective oversight requires state inspectors, petroleum accountants, and technical auditors stationed directly on offshore extraction vessels in real time.
“We’re still using what I call a colonial setup where you come in, you do as you like, and you just leave. Our oversight is poor because we wait until a year after to start asking questions about audited reports and things of that sort,” Professor Hunte stated. “You don’t do stuff like that when you’re dealing with natural resources. You have to have people on the ground.”
Profit Shares vs. National Value Retention
Challenging the standard presentation of petroleum earnings, Professor Hunte noted that the fiscal architecture of the 2016 Production Sharing Agreement (PSA) conceals how little of the total resource value stays in Guyana:
- Shareholder Perspective: Profits belong to oil companies that hold equity in the venture; Guyana is not a shareholder, but the sovereign owner of the resource.
- The Fiscal Split: With the 75 percent cost-recovery ceiling and contractual tax provisions where taxes are settled from the government’s share, the net return to the treasury is significantly diluted relative to gross extracted wealth.
- Ring-Fencing Mandate: Hunte reiterated calls for mandatory ring-fencing on future oil fields to isolate project costs and prevent capital expenditure on new developments from reducing the revenues of active, producing wells.
“Profits only matter to people who have shares in the business. Guyana is not a shareholder in the business,” Hunte emphasized. “They begin to tell you, ‘Oh, we’re going to take 75 percent, share the profits left, and pay your taxes out of your shared funds.’ You’re not really getting anything there. For us, you’ve got to think of the entire pie: ‘We extracted a million barrels of oil today, let me know what the total market value is’—that is the course of action.”
Ministry of Natural Resources Clarification on 50/50 Split and Audits
The Ministry of Natural Resources has defended the state’s fiscal intake, clarifying that Guyana receives an even 50 percent split of all profit oil in accordance with the 2016 PSA:
- Profit Oil Calculation: The Ministry noted that the 39.8 percent effective share cited in some analyses reflects the outcome after full cost recovery is deducted—allocating roughly 20 barrels per 100 for costs, leaving 80 barrels as profit oil, of which Guyana takes half (40 barrels).
- Audit Disallowances: The Ministry highlighted that auditing historic capital costs converts disallowed expenditure directly into profit oil. Citing completed audits where US$214 million, US$65 million, and US$19.6 billion in expense pools were scrutinized—alongside settled audit cases worth US$279.5 million—the government projected that successfully disallowing non-compliant contractor expenses secures substantial additional revenues for the Natural Resource Fund.
