Consultations to be held this week on petroleum fund
We haven’t heard much about the petroleum business lately, but for those viewers concerned about where all those millions of U.S. dollars are going, there’s some good news. Beginning tonight and continuing on Wednesday and Thursday, the Ministry of Natural Resources will be holding a series of public consultations on the establishment of the Petroleum Revenue Management Fund. That fund is being created on the advice of consultants from the Commonwealth Secretariat who have, since October 2006, drafted both a conceptual plan and a detailed design of how the fund will operate. According to Petroleum Coordinator in the Ministry of Natural Resources, Carla Urbina, the objectives of the fund are twofold.
Carla Urbina, Petroleum Coordinator
“One, to inform the general public of where we are in terms of the setting up of the petroleum fund; and two, to obtain their feedback as it relates to any concerns they may have with the general design or the principles that we have so far advanced on the petroleum fund.”
Stewart Krohn
“Carla, it’s difficult to give feedback on something that you haven’t seen. Since these consultations start over the next three nights, wouldn’t you want to facilitate the public by publishing what exactly you’ve come up with so far? How can we obtain copies of this?”
Carla Urbina
“Today we will be distributing a five page summary of the design and the generalised principles. But I would like to highlight that these are basically an initial series of public consultations and, as I said, it’s basically to inform the public of where we are as it relates to the petroleum management fund and its establishment. Right after we get feedback from the generalised public or the public on the whole, we will be drafting the legislation.”
Stewart Krohn
“When you’re talking about this petroleum fund, are you talking about a fund into which all of government’s revenues from petroleum go into?”
Carla Urbina
“Yes, that’s exactly what we are talking about. The petroleum revenue management fund, if I could share with you a little bit more, the main objective would be to maintain the real value of the petroleum wealth that we have in Belize. All the revenues that are collected, be it through royalty, production share, income tax, government work interest will all be deposited directly into a petroleum revenue management fund. And once it’s here, then again we get into the legal status, the governance and accountability of this particular fund, the transparency, the investment guidelines, withdrawal levels for example, disbursement, pending authority, the independent auditing that will need to take place. But yes, this is a fund into which all the petroleum revenues, it doesn’t matter in which form they are collected, would simply be directed into this fund.”
And while it’s nice to know that all the oil revenues will go into a fund, the question remains of just how much money we are talking about. According to Urbina, the experts are relying on extremely conservative estimates that place the size of the Spanish Lookout field at just over ten million barrels and project an average world price over the next fifteen years of around forty-seven U.S. dollars per barrel. That gives us a gross value of just under five hundred million U.S. dollars. How much of that belongs to the treasury cannot be determined as government has not yet completed an audit of Belize Natural Energy to determine their net revenues, as the forty percent income tax–one of G.O.B.’s main sources of oil money–is applicable to net profits, not gross sales.
According to experts consulted by the Ministry, benchmark returns for countries like Belize run from forty-five to sixty percent of net petroleum revenues. According to Urbina, Belize’s eventual take should run at the high end of that range. While we await the work of the auditors, the consultants estimate that the current fiscal year will generate thirty-three million Belize dollars for the fund while next year that figure will rise to forty-six million. Until the fund is formally established, all government petroleum revenues are held in a separate petroleum account at the Central Bank. When that money is transferred to the fund, experts are recommending that it be invested in low risk international bonds.
Tonight’s consultation will take place at the Crystal Palace in Orange Walk beginning at seven-thirty. On Wednesday the venue shifts to the Princess Hotel in Belize City and on Thursday night to the Parish Hall in Punta Gorda. Following the finalisation of a first draft of the legislation, a more extensive set of consultations will be carried out nationwide.
