 head of ug s school of business not sanguine about up front cash from oil and gas industry head of ug s school of business not sanguine about up front cash from oil and gas industry head of ug s school of business not sanguine about up front cash from oil and gas industry webmaster wed 3282018 1129 while the frontloading of contracts and the securing of large contracts might be politically popular it might prove to be economically disastrous university of guyana business professor leyland lucas has said in an article that seeks in part to respond to the popular argument touting the virtue of socalled frontloading that is the drawing down of significant cash amounts of as yet unearned income from the oil and gas industry lucas who is serving as visiting professor at ug s school of entrepreneurship and business innovation sebi says in his article that there could be pitfalls associated with the popular upfront or frontloading argument that has been steadily gaining traction among ordinary guyanese while alluding to what he says is an interesting argument to the effect that guyana would be better off receiving a sizeable bonus rather than waiting for later disbursements through royalties professor lucas argues that such an option is not without its potential dangers and pitfalls he argues that while the numbers being touted in the frontloading argument vary from the wellreasoned to the pieinthesky estimates there is need to examine the domestic realities we are a nation with various needs from education to infrastructure to address those needs we will require a significant influx of financial resources however if that influx is not regulated it will cause inflationary pressures which pressures he argues will not only precipitate massive inflationary pressures that are likely to further damage the country s economy but lead to a further decline in living standards whilst the announcement by exxon mobil of the discovery of oil offshore guyana just under three years ago has triggered expectations of a swift and miraculous economic transformation amongst the uninitiated lucas cautioned that a massive influx of cash does not speedily correct the errors of previous decades engineers scientists agricultural experts and doctors are not created overnight it takes years of training to acquire these skills if the nation is to acquire these skills then it must be done over time an alluding to the volatility of the global oil market professor lucas raised the question as to where the resources will come from when an engineer needs specialized training in five years but the bottom has fallen out of the oil sector and in concluding his position on frontloading professor lucas contended that a massive unregulated inflow of cash through a significant bonus may entice policy makers to undertake massive investment projects which the economy cannot embrace with its limited skills inventory instead a gradual inflow of expenditure might prove more beneficial to the nation in the long run in his article the guyanese academic also weighs in on the subject of the controversy that has arisen over the exxon mobil contract including the call in some quarters for a renegotiation of the agreement lucas argues that the controversy associated with the current contract cannot ignore the fact that a contract previously existed how do we renegotiate this contract moves and countermoves will only make sense if one party has something that is vital to the other and can force the latter to respond to the actions of the former in this case we have a product that the world wants but does not need any moves by our negotiators can be easily ignored consequently it makes no sense to renegotiate a contract from a position of weakness we do not own the wells we do not have the skills necessary to exploit them and we do not have the technology to provide the valueadded products in fact truth be told at this stage we are struggling to meet local content requirements one cannot renegotiate a contract from a position of future possibilities but must do so within the current context so any conversations of renegotiation will take place from a position of weakness rather than one of strength lucas declared article adapted from  https wwwstabroeknewscom 2018 business 323 headofugsschoolofbusinessnotsanguineaboutupfrontca  dr leyland m lucas oil oil gas 