Ram and McRae (Part 3): Exxon packing up, stop kidding, please

I have been unambiguous before, will be just as unambiguous today. Exxon must make rich returns on its oil investments in Guyana. It has. Beyond imagination, spreadsheet calculation, leadership vision. In identical fashion, so must Guyana. The Guyanese people must also make money. Much more money from their oil, and not in the meager amounts that have trickled into their Oil Fund in New York. Exxon’s response has been unequivocal: hell, no! Not now! Not ever! Now, along came this very timely and pertinent Ram and McRae survey, an oil-focused survey, if I may. From that survey came a revelation: 94% of the respondents said that the Exxon contract should be renegotiated. So, this is where matters stand: the immovable object (Exxon) and the gathering momentum (Guyanese).

Exxon’s bouncer in Guyana, Mr. Alistair Routledge is on record about where his company is re renegotiation. No deal. No way. To do so would upset Exxon’s finely calibrated plans already in motion, as well as those to come. Renegotiation is neither feasible nor discussible. Renegotiation is not reasonable nor practicable. Renegotiation is not sellable nor acceptable. To hammer Exxon’s stance home: renegotiation is nonnegotiable. Most regrettably, Guyanese before and Guyanese again have taken up the cudgels in behalf of the company and come up with the startling. It is what only Exxon could have dreamed up, but dared not put before the Guyanese public. Packing up its bags and abandoning the oil riches of Guyana. Is somebody stark, raving mad in Guyana? Is there no sane or sober person left in the PPP Government’s side of Guyana?

Let’s look at the state of the company’s oil books. Exxon’s profits from its Guyana operations are not borderline, i.e., rickety and skimpy. Rather, the company’s returns on its investments here have been rich, then richer, and up in the stratosphere. Exxon’s earnings certificates have been the source of envy and awe around the world. It stands like some cosmic giant at the pinnacle of the oil pyramid. Guyana’s oil has contributed heavily: it is high quality, it is plentiful and, most of all, it is flea market cheap. With profits from Guyana at such astronomical levels and an oil deal that has its lucrative nooks and crannies, who among Exxon’s top executives, who on its board of directors, is going to vote to pull up stakes in Guyana and return to Texas? Who is going to abandon closing in on oil production of a million barrels a day (unmonitored and uninhibited) because of the plea of people for renegotiation of their oil contract?

Moreover, Exxon has invested tens of billions of its own equity in Guyana’s oilfields and prospects, at uncapped rates of return. Its decisionmakers would have to be incredibly reckless and lacking in fiduciary duty to their people to walk away from that, and let whatever differences and disputes arise to wend their way through the courts. Exxon’s executives got to where they are because they are rational, weigh all the probabilities, work through the unknowns, and hold fast to the best course of action. For the company and its investors. For the continued dominance of both. For being smarter today, so as to assure living to fight another day beyond tomorrow. In a nutshell, Exxon is not going anywhere, and Guyanese can take that to the bank. There is another strain of economic logic that subscribes to Exxon’s sticking around, regardless of whether renegotiation goes anywhere, or what are the fruits that it produces.

Exxon’s profit margins in Guyana are so enormous that it can agree to throwing some royalty points and tax percent rates, among other things, at Guyana, and still make money like a gambler that hits a long, rich streak. Exxon knows this all too well, despite Mr. Routledge’s crying poverty, if renegotiation were to be forced on his company’s head, God forbid. I call him Routledge the Exaggerator. Alistair the scaremonger. Both Exxon and Mr. Routledge also know that Guyana offers the perfect oil lake in which to operate. It is 120 miles from civilization and out in the big, deep ocean, to boot. There is a contract in place that has so many loopholes for Exxon to tighten the noose around Guyana’s neck that those amount to a contract all by themselves [the loopholes]. Spending is one. Flaring and dumping are two others. Further, Guyana is woefully lacking in human resource and technological capacities, which puts Exxon in the driver’s seat. Which company executive in his right mind is going to leave all that behind? Even further, it was Master Speaker, John Hess, who said that the Guyana Government is the embodiment of democracy. This from an American while Guyanese are being attacked and vilified for speaking truth about their oil wealth. The translation of John Hess’s code word (democracy) is that the PPP Government and its leadership are putty, total pushovers, in the hands of Exxon. It is why Chevron overpaid to get a toehold here. Leave? Is somebody kidding? In such circumstances, who is going to close up shop in Guyana and jump on the next flight out should renegotiation take wing?

Though not favored, there is glowing appreciation for partisan (PPP) sales pitches about not pushing Exxon out the door with this renegotiation nonsense. It is what mindless partisans do. Also, I accept that people must prove their worth. But, at least, let the totality of reality feature prominently in what is being huckstered. Exxon is going nowhere. Guyanese want renegotiation, per the Ram and McRae survey. Leaders had better get with that program, if they value staying where they are. As for Exxon, it knows what it must do, because renegotiation is all but inevitable, with the right group, the right leader.