Author: Christopher Ram

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The Four-to-One Formula: How Guyana’s 50-50 Oil Deal Turns into a Mathematical Impossibility

Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 161 – 12 June 2024

Confusion over Oil profit  

Last year, my summary column discussing the 2023 audited financial reports of Stabroek Block contractors had the caption “Oil companies have earned five times more from oil than Guyana. Modest investment, gargantuan returns.” If anything has changed, the money deluge has continued to flow upward and faster in the direction of those contractors. But before we look at those incredible numbers, maybe a word about Vice President Jagdeo’s exchange with a reporter of relevance to today’s column might be revealing.

Reporter to Jagdeo. “Can you explain Exxon and its partners reporting that their profits for 2024 being 10 billion US dollars, but Guyana only got 2.6 billion, despite it being a 50-50 profit sharing”.

Jagdeo’s response: “So I saw something about Exxon reporting a trillion dollars in profit over the three years and they said that the government got about 1.3 trillion dollars. So that’s about consistent with the formula which says that 14.5 percent of the 25 percent which is set out for as profit sharing would result in that configuration and they would have 10.5. So that’s consistent from what I saw. It can’t be any different.

“In these years they have to get less profits than we have received because of that formula. They have spoken about paying back the capital, which is a different matter about paying back the capital invested which comes out of the 75 percent of revenue allocated for that purpose. So, we can’t conflate the two.

“They’re very different and it’s consistent with the formula. And just to tell you that to give you an indication if they say 1.3 trillion dollars we got since the beginning of oil that’s less than this year’s budget. One year budget but that’s what we got from the beginning.

So that conforms what we have been saying because we passed five budgets so far. So entirely clear.”

The Vice President’s shutting down the question with the words “So entirely clear” suggests that he was confused by his own garbled logic for all the world to see. For Guyanese, it was embarrassing to see the Vice President with responsibility for the dominant petroleum sector display such a poor knowledge and understanding of the Petroleum Agreement which has been around in its present form for nine years, and in its earlier form for twenty-six years. What makes it regrettable is that his response – because of its egregiously flawed answer, might unfortunately be seen and used by the oil companies as a validation of the accounting methodology, content and form when it really is just the opposite. For readers’ benefit let us recap the correct formula for the allocation of profits between the Government as a one-half party and the oil companies as a collective, as the other.  

Profit is arrived at taking after a) the payment of a royalty of 2% of all petroleum produced and sold, net of deduction of quantity used for fuel and transportation; and b) deduction of recoverable cost up to a maximum of 75% of total revenue. By an amendment to the Agreement, the government and the oil companies agreed that “royalties” are not a recoverable expense charged to the operations so that much is set aside for the government. The balance is shared between the Government and the Contractor for each Field in the following proportions: Contractor fifty percent (50%) and Minister fifty percent (50%).”

Applying the formula (100% – [2% + 75%]) ÷ 2 = 11.5% – the government receives a minimum of 13.5% (2% royalty plus 50% of profit) and the oil companies get 11.5%. Jagdeo’s 14.5 % and 10.5% are wrong. He also advances the novel proposition that there is a 75% allocation for the payback of capital invested. That too is incorrect. It is a cap on recoverable expenses for any year, whether for capital or operating expenses. And then he throws in the dead herring about Guyana’s share of profit oil without acknowledging that the government pays the taxes of the oil companies for which they are issued a Certificate of Taxes paid by someone or the other.

Back to the numbers

Table 1.  

Source: Audited financial statements

The Table is constructed from the audited financial statements of the three companies for 2024. The total profit before the mythical tax for the three companies amounted to G$2,686,308 Mn of which Exxon’s share is 47% (2023 – 46%), Hess at G$526,236 Mn. or 33% (2023 – 32%) and CNOOC of 21% (2023 – 22%). These numbers are consistent with 2023. Readers can turn to Columns 157 – 159 for a review and commentary on the 2024 financial statements of each of the three oil companies, including both their income statement and balance sheet.

Having commented in the past years about the lack of comparability of the financial statements, I am amazed that the auditors appointed by the Government at a considerable cost, never seem to have recognised this self-evident fact. Because of what is stated in the introduction, this should surprise no one.

Before any discussion on these 2024 results, I share with readers the profits earned by the oil companies from 2020 – 2024, compared with the returns to the Government over the same period.

 Table 2: Cumulative numbers

In Column 162 to be published next Friday, we will have a general discussion on these Tables.

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CNOOC Joins the Profit Binge in Guyana – Guyanese look on

Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 160 – 10 June 2025

Introduction

Today’s column addresses the audited financial statements of CNOOC Petroleum Guyana Limited, the third-ranking partner with a 25% interest in the Stabroek Block operating under the 2016 Petroleum Agreement. Like Exxon and Hess, CNOOC is also a branch of an external company, in this case, incorporated under the Companies Act of Barbados. Unlike Exxon and Hess, CNOOC maintains a very low profile in Guyana, leaving the heavy PR lifting to Exxon, the designated Operator under the Agreement. Its ultimate parent company is the China Offshore Oil Corporation, established in the People’s Republic of China (PRC).

But CNOOC’s annual report is not another corporate success story wrapped in glossy annual reports and feel-good community photos. This is cold, hard evidence of a foreign state-owned enterprise that systematically extracts wealth from non-renewal Guyanese resources while operating under the same controversial 2016 Petroleum Agreement that continues to benefit foreign businesses over the national interest.

Like its co-venturers, CNOOC shares in the 2024 bonanza, its income statement revealing profits that would make any multinational corporation green with envy, sweetened through a tax arrangement under which its taxes are paid by the Government of Guyana.

Financial Statements

The rest of this column examines the financial statements of the company’s participating interest in the Stabroek Block. All information sourced from the Branch’s financial statements.

Revenue

The company’s revenue for 2024 reached G$819.1 million – a 59.4% increase over 2023. That figure includes $22.9 Mn which the company describes as “Deferred income tax expense”, presumably the amount which the Government will pay on its behalf under Article 15.4 of the Agreement. The notes to the financial statements disclose that all the oil from its share of the operations is sold to China Offshore Oil (Singapore) International Pte Ltd, a member of its group.

While total expenses for 2024 amounted to G$265.5 million, up 68% from 2023, the largest portion was not actual cash expenditure but a book transaction following accounting convention. The largest single expense is Depreciation, depletion, and amortization of G$186.2 million, representing 70.1% of total expenses – in other words, more than twice as much all other expenses combined. Operating costs was G$64.4 million, or 7.9% of revenue, revealing the Stabroek operation’s efficiency: once wells are drilled and production units installed, the cost of extracting each additional barrel is minimal.

After all expenses and the Deferred Tax Expense, the company recorded net income of G$530.7 million – a 66.5% increase from 2023. Expressed another way, the net profit margin is a massive 64.8%.

The Balance Sheet

Total assets increased during the year by 28.9% to G$1.55 billion, or 28.9%. Of this, property, plant and equipment accounts for G$1.548 billion, or 99.9% of total assets. The company’s balance sheet shows that it held just G$60 million in cash, to meet any eventuality which may arise. The balance sheet indicates that the amount due to Affiliates reducing by $136 Mn, of which the bulk was “Financing” of $107 Mn, and the remainder was “Investing”. These items need explanation since the oil companies have repeatedly stated that no interest is charged on the operations.

The liability side shows how the assets are financed – by credits, equity and retained earnings. Let us look at these. Credits have decreased from $323 Mn. to $191 Mn, or roughly 40%. Then there are the tax liability and Deferred income tax liability which makes up 18.3% of the total assets. The balance of $1,074.9 Mn, or 70% is financed by retained profits, and that is after the payment of $104.3 Mn dividends in 2024. 

The shareholder’s equity is entirely made up of retained earnings of G$1,075 Mn. having grown by GYD $426.5 million in profit after dividend in 2024. This represents profits retained in the business to finance capital injection.

Conclusion

CNOOC may not have the flair of Exxon or the drama of HESS but in its own quiet and discreet way its performance matches its American counterparts in another bumper year with its hosts Guyana – or rather its leaders – mesmerised into paralysis and content to do nothing. 

See this coming Friday for the overall picture.

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The Mahdia betrayal: How the PSC let charity die in service to a government that claims to care – Part 25

Business and Economic Commentary

Just over two years ago, nineteen female students and one boy died in a horrific fire that engulfed the Mahdia Secondary School dormitory. Within hours, Education Minister Priya Manickchand posted detailed Facebook updates from the scene. The government rushed to issue formal statements, dispatch planes, and position itself as the sole source of assistance, compassion and care. It even established a Commission of Inquiry to investigate the causes of this horrific tragedy. A recent meeting of the Private Sector Commission of Guyana showed that the Government was not only interested in shaping the narrative and redirecting any blame, but also acted to deny the families benefits and assistance.

Horrified by the tragedy, nearly thirty million dollars were channeled through the Private Sector Commission for the victims’ families – a genuine expression of corporate social responsibility and human compassion. Persons from the leadership of the PSC decided, quite improperly, to share this information with the government’s leadership. Instead of matching the contribution or congratulating the PSC for this independent charitable initiative, the government inveigled the Private Sector Commission to withhold the donation. The government demanded exclusive credit for assisting victims, even if it meant denying desperate families the help they needed. Even charitable space, it seems, must be occupied by the government, to the exclusion of all others.

The PSC complied, burying this act of charity as a single, unexplained line item in its 2024 financial statements. This was a demonstration of staggering insensitivity to the PSC’s independence, but far more importantly, to the bereaved families’ suffering as an accounting footnote.

This represents a triple betrayal: of the families affected by the Mahdia disaster, of corporate governance principles, and most importantly, of basic human compassion in service to a government that only boasts how much it cares.

The Government’s monopoly on grief

Through programmes like “Because We Care,” the Government owns compassion, the tragic death of 20 children as an opportunity to burnish their brand. The hypocrisy is staggering. When genuine private sector compassion emerged to contribute thirty million dollars for the families, the all-caring government swiftly suppressed it. They could not tolerate competing narratives of care or independent expressions of humanity that might diminish their political capital from tragedy.

The Mahdia fire represented catastrophic government failure: children dying in state custody due to official negligence. Yet when private citizens attempted a genuine charitable response, the government saw competition rather than cooperation. Equally shamefully, the PSC’s compliance reveals an organisation that prioritises political favour over human decency, allowing political and personal calculations to strangle corporate conscience.

This capitulation reflects the PSC’s systematic capture over the past decade. The Commission has become a revolving door for PPP/C friends and family – a launching pad for loyalists seeking lucrative state appointments or government contracts. Senior PSC positions now function as auditions for government favours rather than platforms for service to membership and country. This may be an egregious example, exposed by the membership at an Annual General Meeting. By casually documenting their failure to assist grieving families, the leadership revealed an organisation without a moral compass or institutional shame.

The Mahdia families have endured compounded tragedy. Their children died due to government negligence. Now they may never know that thirty million dollars was raised specifically for them and deliberately withheld for political reasons. Their grief has been weaponised and politicised while their practical needs remain unmet.

A moment of reckoning

The AGM has given the PSC a chance to start on the road to redemption. The new leadership must distance itself from the unacceptable culture that has degraded the organisation over the past decade. The immediate test is clear: pay out the thirty million dollars to victims’ families immediately and tell the government to keep away. This money belongs to grieving families, not political calculations.

The Commission must also publicly apologise – to the donors who trusted them with their charitable intentions, to the Mahdia families who were denied assistance, to PSC members who were kept in the dark, and to all Guyanese who expected better. The PSC’s leaders were too weak and put political service above humanity when strength and compassion were most needed.

It must also call for and demonstrate a culture of independence, strength and courage that does not alter because of its new leaders’ personal qualities and values. The culture of the revolving door must be outlawed by the PSC’s constituent documents and a code of conduct that demands a Declaration of Interest and a Register of Interest. It must start setting an example of good governance by stopping blocking the introduction of a Code of Corporate Governance.

But immediately, pay out the money.

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Caribbean economies face perfect storm as Trump targets regional trade policies – Part 21

Business and Economic Commentary by Christopher Ram 

Introduction

The contrast could not be starker: As Guyana continues to offer American oil giants ExxonMobil and Hess some of the most generous terms in the global petroleum industry, US President Donald Trump is crafting trade policies that could devastate the Caribbean’s traditional export sectors.

Trump’s latest trade offensive goes far beyond his previous actions against major trading partners like China, Canada, and Mexico. After successfully pressing Colombia and Guatemala into trade concessions, he now targets the fundamental tools developing economies use to build their industries – including the Value-Added Tax (VAT) system that underpins Caribbean government revenues.

Immediate challenges

For the business community, three aspects of Trump’s new approach demand immediate attention:

First, his team is examining not just tariffs but entire national economic systems – including tax policies, industrial subsidies, and exchange rate management. His senior trade counselor, Peter Navarro, has specifically criticised VAT systems like those used throughout CARICOM as “trade exploitation,” suggesting they could face American countermeasures.

Second, Trump’s declaration that “if you build your product in the United States, there are no tariffs” reveals a puzzling blind spot toward services – a sector that dominates modern economies. This manufacturing-centric view raises questions about how digital services, financial products, and tourism might fare under Trump’s latest proposed regime.

Third, and most concerning for Caribbean businesses, is the April 2 deadline set by commerce secretary nominee Howard Lutnick for implementing these sweeping changes. This compressed timeline leaves little room for the diplomatic negotiations typically used to resolve trade arrangements and disputes.

The Vulnerability of CARICOM

For Caribbean enterprises, the Common External Tariff (CET) – long considered a shield for regional development – could become their greatest liability. Under Trump’s expanded criteria, this cornerstone of CARICOM economic policy could trigger retaliatory U.S. tariffs, creating a difficult choice between regional integration and access to American markets.

The implications for Guyana’s business sector are particularly complex. While the oil sector enjoys unprecedented benefits, gold, seafood, sugar, and rice exporters face a double threat: potential U.S. tariffs on their products and additional penalties triggered by the development policies designed to support them.

Consider a rice exporter: Not only might they face higher tariffs on their U.S. shipments, but government programmes supporting their industry – from preferential financing to export promotion – could be deemed “unfair practices” under Trump’s new framework.

Business Impact and Response Options

Caribbean businesses need to prepare for multiple scenarios:

Direct export challenges: Companies selling to the U.S. should model the impact of potential tariff increases and explore market diversification strategies.

Supply chain disruption: Firms relying on U.S. imports may need to identify alternative suppliers or pass increased costs to consumers.

Regulatory compliance: Businesses benefiting from government support programmes might face scrutiny under the new U.S. criteria.

The absence of a coordinated regional response is particularly troubling. While individual companies can take defensive measures, the broader threat to Caribbean economic integration requires collective action. CARICOM’s Council for Trade and Economic Development (COTED) needs to develop a comprehensive strategy that protects both regional businesses and the integration framework they depend on.

A time to act

Given the stakes involved, the current silence from both Shiv Chanderpaul Drive as well as Robb Street is worrying. With political appointees occupying key diplomatic posts and career trade negotiators sidelined, the private sector may need to be more active in defending its interests.

The coming weeks will test both the resilience of Caribbean businesses and the strength of regional economic integration. As Trump’s trade offensive unfolds, the cost of inaction could be devastating for companies that have built their success on access to U.S. markets and regional cooperation.

The April 2 deadline leaves little time for Caribbean governments and businesses to adapt. President Ali and other CARICOM leaders must urgently address both the immediate threat and longer-term implications for regional economic integration.

For the business community, waiting for their government to act may be both inadequate and too late. Forward-thinking companies must assess their tariff vulnerabilities, diversify their markets, document their trade compliance, and build coalitions to advocate for their collective interests.

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Unnatural deaths, unexplained silence: Workplace safety in Guyana – Part 20

Business and economic commentary by Christopher Ram

Introduction

In a letter in the Stabroek News of 11 January 2025, spurred by the tragic death of the Chinese rigger at the Demerara Harbour Bridge (DBH), I noted that the many injuries and fatalities that occur annually in mining pits, construction sites, and factories across Guyana underscore the widespread neglect of workplace safety. A few days later, a stevedore died while working at John Fernandes Limited Wharf.

While the Occupational Safety and Health Division of the Ministry of Labour has been forthcoming about their investigation into the death of the stevedore at John Fernandes Wharf, there is a parallel legal requirement that seems to have escaped public attention. Under Guyana’s Coroners Act, any unnatural death – which includes workplace fatalities – requires investigation by a coroner, either through an inquest with a jury or an inquiry without one. My attempts to ascertain from the relevant Magistrate’s office whether either form of investigation has been initiated for either death have been unsuccessful, with calls unreturned. This silence is particularly concerning given that the Act requires the coroner to “forthwith cause due investigation to be made” when such deaths occur.

Curiously, neither the press, which initially reported these deaths, nor trade unions have followed up on whether these legally mandated investigations are taking place. Media coverage typically ends with Ministry of Labour announcements, overlooking the crucial role of coroner’s investigations in ensuring public accountability for workplace deaths. This oversight by the press and organized labour effectively shields employers from public scrutiny.

Legislative framework

In 1997, Guyana passed the Occupational Safety and Health Act, designed to “Improve working conditions and the environment with an emphasis on prevention rather than cure.” Yet, the culture of unsafe workplace conditions is widespread and worsening. A couple of weeks ago, at a construction site in Ogle, East Coast Demerara, I witnessed a worker climbing the boom of a huge crane without headgear or harness.

The gap between law and practice is stark. While the Ministry of Labour actively investigates workplace deaths, the parallel legal requirement for coroner’s investigations appears neglected. The Coroners Act provides a crucial framework requiring post-mortem examinations, witness testimony, and detailed documentation – elements that could strengthen accountability and workers’ compensation claims. However, these mandated procedures often fall victim to resource constraints.

Poor enforcement

Poor enforcement and inadequate resources explain much of this gap. The Ministry of Labour and Regional Administrations lack the necessary resources to enforce compliance with safety legislation. The magistracy, required by the Coroners Act to investigate every unnatural death, appears similarly constrained. Consequently, workers’ lives remain at risk in a system that has not evolved to meet the complexities of modern employment relationships, particularly in the country’s booming construction sector and extractive industries.

A significant legislative gap exists in cases where principal employers contract out work. This loophole allows businesses to disclaim responsibility, leaving employees at the mercy of subcontractors who often operate in the informal sector. In such cases, the absence of proper coroner’s investigations means that the chain of responsibility remains unexamined and unrecorded.

The compensation system is equally problematic. While the law requires compensation for workplace injuries and deaths, many contractors fail to secure adequate insurance coverage, or any at all. Victims’ families must navigate a convoluted process without the benefit of findings from proper coroner’s investigations that could support their claims.

Recommendations and Conclusion

Four areas require urgent attention. First, while the Ministry of Labour provides information about workplace fatality investigations, the parallel requirement for coroner’s investigations must be honoured. Second, the Coroners Act must be fully implemented, with adequate funding and staffing. The current situation, where attempts to confirm whether legally required investigations are taking place meet with silence, is unacceptable. Third, the entire system of apportioning legal liability between primary and secondary contractors must be addressed. Fourth, the adequacy of insurance coverage against injury and death at the workplace must be addressed. 

Trade unions, consumer rights advocates and civil society generally must educate themselves about existing legal frameworks, including the Coroners Act, and use these tools to demand accountability. Workers must be educated about their rights and encouraged to report unsafe conditions without fear of retaliation. Most importantly, the press must follow workplace death cases beyond initial Ministry of Labour statements and demand to know whether legally required coroner’s investigations are held.