“We, the United Democratic Party, do hereby pledge to offer shares in a National Oil Company to ordinary Belizeans so that the masses of the people can collect dividends and have a personal stake in the national petroleum wealth.”- UDP Election Pledge, January 8, 2008

Before the elections in February, the then leader of the Opposition Dean Barrow harassed and harangued the PUP government about the paltry share of oil revenues that was accruing to the government of Belize. He demanded that Belizeans be given the chance to own shares in the oil companies. After becoming Prime Minister though, he took almost six months to “negotiate” with BNE before announcing what he called a petroleum surcharge that is to bolster GOB’s share of the oil revenues.

Barrow did the usual press conference gig last month, accompanied by BNE, to extol the virtues of his proposed surcharge, declaring that it would generate $18 million in additional taxes for the period September 2008 to March 2009. Now, even before the House debates his oil surcharge bill next Friday August 22, it is becoming clear that Barrow’s projections are in serious jeopardy and his proposed law is yet another UDP legislative blunder.

In the first instance, the estimated take of $18 million for the government from the surcharge is based on an average per barrel oil price of US $130. In the weeks since Barrow announced his estimates (and tabled them in the House with new Budget Projections), the price of oil has fallen significantly, standing at US $113 per barrel as this newspaper goes to press. Even before the law is debated then, it is clear that Belizeans will hardly benefit to the extent that Barrow promised.

Far more detrimental to the Belizean people is the proposed oil surcharge law – The Income and Business Tax Amendment Act 2008. The law is literally laden with loopholes. It proposes to levy a 50% surcharge only on revenues above US $90 per barrel but this surcharge is incredibly subject to the following provisions:

-              BNE can deduct royalties and production share before paying its surcharge

-              Before paying its income taxes, BNE will be allowed to deduct the very surcharge itself

-              When BNE starts pumping oil from other oil fields, it will pay just 15% surcharge at a threshold of US $100 per barrel; only when prices reach US $190 per barrel would BNE pay 50%

-              When other oil companies begin pumping oil, they also will not pay until the per barrel price reaches US $100, and they too will only pay a surcharge starting at 15%

-              BNE’s surcharge on its existing fields is only for a five year period, after which they will then pay the lower rate starting at 15% and at the higher threshold of US $100 per barrel

-              new oil companies will be exempt from paying the surcharge until they recover their capital investments

-              And the UDP government can waive the surcharge by approving hedging arrangements by the company, without the approval of the House

All this crucial fine print, of course, was missing from the Barrow press conference announcing the petroleum surcharge.  

The fact is that more than two years ago during the PUP tenure, the now Leader of the Opposition, then the Minister responsible for Petroleum Hon. John Briceno had proposed an oil surcharge called a “Rent Resource Tax” or RRT. This RRT would be charged after the oil company reached a certain level of profitability. At the time, Hon. Briceno and his Chief Petroleum Advisor Ambassador Eamon Courtenay had designed the RRT to kick in once the oil company had achieved a pre-determined rate of return on their initial investment. This formula would have secured a far greater share of the oil wealth for Belizeans while assuring a reasonable rate of return for the oil companies.

At the bottom line of oil is the question of how much Belizeans have gotten and will get from every dollar of our petroleum extracted and exported. Right now, by BNE’s own admission, Belizeans have gotten just 27 cents of every petroleum dollar. This is daylight robbery.

The Barrow Administration not only promised to secure a far greater share of the oil wealth for Belizeans; they pledged, in black and white, to make shares available to ordinary Belizeans. Today, not only is there dead silence on the matter of equity for Belizeans in the oil companies but Barrow and the UDP have been out-maneuvered in plain sight in their feeble attempt to secure a bigger slice of the petroleum pie for Belizeans. If this is the best that Barrow and the UDP can deliver during their first year, imagine the probabilities with each passing day.