There should be a new role for the Guyanese trade union movement in Guyana’s oil economy. Guyana’s equilibrium oil price is expected to average $ 35 per barrel over the long term, well below current projections for global oil prices (although dependent on the pandemic recovery) and therefore very profitable. Exxon has received very generous terms from the Guyanese government and the government will lose tens of billions of US dollars in oil revenue over time. Guyana will take about 52% of oil profits in the Stabroek block, well below international standards, and Exxon will see an internal rate of return (IRR) on its investment of 22% -28%, well above the low of 15. % required to undertake risky exploration. If oil production, just from discoveries to date, is pumped, Guyana will become a major oil producing country. All of this hinges on a continued demand for oil – which, despite the accelerating impacts of climate change, remains in high demand for now. Guyana’s economy grew by 40% in 2020 after oil production at the end of 2019. This growth rate has been achieved despite the Covid-19 pandemic – although it is half the rate projected before the pandemic. The International Monetary Fund (IMF) has forecast that real GDP (a measure of the size of the economy) will grow relatively more slowly by 16.4% in 2021 – still the fourth fastest projected growth rate in the world – and that the size of Guyana’s economy between 2019 and 2025 will triple. This makes Guyana, on a per capita basis, one of the three richest countries in South America by 2025. However, the crucial questions are: who would benefit from this growth and how will the generated wealth be. distributed?
In 2018, the Guyanese government created a sovereign fund and named it the National Resource Fund (NRF). A share of the oil revenues will be deposited into the fund each year and this money will be invested, generating returns, not themselves directly linked to oil production, which can then be used to develop other unrelated sectors of the economy. resources, for example through public infrastructure, utilities and industrial policy. Overall, countries whose fortunes suddenly change due to the discovery of oil do not always improve. This may be due to corruption, insufficient reinvestment of capital in other industries (“the resource curse”) and / or politics. Guyana, however, is showing itself positively in this regard, creating a sovereign fund and joining the Extractive Industries Transparency Initiative (EITI), whose mission is to “promote the open and responsible management of oil, gas and mineral resources. “. Oil is a natural resource which belongs in common to the peoples where it is found. It is different from other products. A company cannot just start producing petroleum like automobiles or t-shirts; it must have government permission to explore and then extract. Therefore, a company’s profits for extracting oil are not just the result of the market – it is as much, if not more, the result of public policy on profit sharing. Once again, a question of distribution arises: how will the profits from the sale of a natural resource, belonging to the Guyanese people, be distributed between them and the oil companies? Guyana’s first Production Sharing Agreement (PSA) with the Exxon-led consortium for the Stabroek block was signed in 2016. When it was made public, the PSA was heavily criticized, including from some. unexpected circles, such as the International Monetary Fund. (IMF). A 2018 report from the Fund said that the terms set by Guyana “are relatively favorable to investors by international standards … Existing production-sharing agreements appear to benefit from royalty rates well below those observed internationally.” The IMF has recommended making less generous and less favorable deals and ensuring that more of the oil-generated wealth stays in the country.
Under these alternative conditions, Exxon would continue to profit widely, but Guyana would obtain a larger and fairer share of the profits. The average share of the profits going to the Guyanese government is said to be 69% on average, more in line with global standards. That would represent $ 55 billion more in government revenue over the expected 40-year life of the Stabroek project, given an average price per barrel of $ 65, which is exactly one-third more. In 2030 alone, that would translate into an additional $ 3.4 billion for government and economic development in Guyana. Meanwhile, Exxon will make super profits. Climate change may indeed be one of the best reasons to demand higher profits on future agreements. It is not known how long Exxon and the other oil majors will be able to extract Guyanese oil given the global goal of net zero emissions set in the Paris Agreement and increasingly adopted by countries around the world. Guyana itself is a low-lying coastal state, with much of its population threatened by rising sea levels and protected by a collapsing sea wall. Retaining a larger share of oil profits now will allow Guyana to cut production sooner, but also retain a sufficient share of oil profits to protect itself from the effects of climate change and transition its economy.
The legally binding instrument represents a unique opportunity to end impunity for human rights violations by business. Many companies have resorted to abruptly ending the purchase of goods and services and even breaking past commitments with disastrous consequences for workers in global supply chains. Simultaneously, other people identified as key workers in the COVID-19 pandemic crisis, including seafarers and packing and distribution centers, continue to work afloat with enormous personal risk of exposure and often without adequate personal protective equipment. To ensure that Guyana’s economy is not only resilient, but also conducive to social progress, the Guyanese government must now step up its engagement in the binding treaty process. We also believe that it provides a solid foundation for effectively addressing the existing accountability and liability gaps resulting from the complex structures of transnational corporations and their supply chains that dominate the global economy. A key priority for trade unions is that the legally binding instrument ensures that transnational corporations can be held accountable for human rights violations throughout their activities, including those committed by entities in the supply chain. , regardless of the mode of creation, ownership or control. Of further importance is a provision that explicitly requires the state to ensure that any existing or new trade and investment agreement is compatible with human rights obligations under the treaty. legally binding. However, we believe that an additional article that obliges the state to include a binding and enforceable human rights and labor clause in trade and investment agreements will further strengthen the case for trade and commerce. sustainable development.
Although we have the broad scope of human rights protection under the law, respect for fundamental principles and rights at work must be dissociated from the requirement to ratify core ILO Conventions. We advocated for the following key priorities to be included in the local content instrument: a broad and substantial scope covering all internationally recognized human rights, including fundamental workers and trade union rights, such as defined by relevant international labor standards; Regulatory measures that require companies to adopt and apply human rights due diligence policies and procedures; Reaffirmation of the applicability of human rights obligations to corporate operations and their obligation to respect human rights, and, A strong international monitoring and enforcement mechanism. Given the need to consult relevant stakeholders, we believe there should be an express provision that human rights due diligence should be informed by meaningful engagement with trade unions. It must also be recognized that consultation is a right in itself in many labor instruments. The OECD Due Diligence Guidance for Responsible Business Conduct makes this very clear, and this should also be reflected in the legally binding instrument.
Office and commercial workers