I read in the Guyana papers that BP will market Guyana’s oil over the next year. Guyana gets several
million barrels of oil annually; agents bid to sell Guyana’s oil. Saudi Arabia sold Guyana’s oil recently. I don’t know the reason for Saudi Arabia selling Guyana oil. Now BP has the contract to sell Guyana oil.
BPhas had a strong presence in neighboring Trinidad over the last several decades. Why is BP selling our crude? Can’t Guyana not sell directly to potential buyers? Several buyers expressed an interest in directly purchasing the oil by-passing an agent.
As I understand, Guyana’s oil is sold at the market price on the international spot market. There is a demand for Guyana’s sweet or light crude which is easier to distill (refined) and which produces less by products than thick crude, making it very attractive to purchasers or sellers as the oil fetch a higher price. At least that is what I learn from by Bio-Chemistry studies on lab distillation of hydrocarbons over four decades ago. Modern technology may have simplified distillation or refining crude in contemporary times.
An important question is whether Guyana is paying a commission to third parties to act as agent in marketing our crude. If so, then we lose out on some revenues (however small) given that other countries and oil companies offered to purchase our oil directly at the prevailing international market price. The loss of a small amount of revenues mean a lot for a poor country like Guyana. No commission would be involved in selling directly to the buyer if indeed we have buyers.
India purchased Guyana lift of oil of a million barrels last year. Guyana media reported some time ago that India offered to purchase all of Guyana’s share of crude at prevailing international market price. The India High Commission also made that information known. India had also offered to purchase the crude at an agreed negotiated fixed price regardless of market price. The offer was turned down. Saudi Arabia with which Guyana did not enjoy close relations in comparison with India, was given the contract to market Guyana crude. It is not known which country or company purchased Guyana crude.
Several countries enter into agreements to sell crude at fixed price irrespective of market price. Guaranteed direct sale of oil at fixed price gives some stability to market price and guarantees the sale of the raw material for the seller. However, if market price of oil were to dip below agreed price, Guyana benefits and if the market price is higher then, India benefits; that is the nature of business. Oil price recently dipped but has been going up and down. As countries move away from fossil fuel, oil price will sink.
Isn’t it better for Guyana to sell oil directly to a buyer that is offering guaranteed purchase — whether at international market price or fixed price?
