Government has promised to pronounce on the production licence of ExxonMobil within the next few weeks.
Amidst debate pushing for a best possible deal for Guyana, Minister of Natural Resources, Raphael Trotman, yesterday disclosed that Government is in the process of finalising ExxonMobil’s production licence.
The minister recently made it clear that negotiations are ongoing to receive a better deal than a one percent royalty that is currently being proposed, based on an almost two-decade old agreement between Guyana and the US-owned exploration company.
The Minister made the announcement on the production licence to stakeholders in opening remarks at the Guyana Extractive Industries Transparency Initiative (GEITI) capacity-building symposium which was held at the Pegasus Hotel, Kingston, Georgetown yesterday.
“Government has received an application for a production licence to be issued to ExxonMobil. We are finalising that process, and will be making some pronouncements in the next few weeks,” Minister Trotman said.
The existing contract is a 50-50 partnership Production Sharing Agreement (PSA).
ExxonMobil and its partners will be allowed to recover the cost invested in the offshore production before the equal sharing of the profit oil, a government statement explained.
The government had undertaken a review of the contract which dates back to 1999. Minister Trotman had indicated that the review was to update the contract, but assured that the government respects the “sanctity of contracts entered into.”
There have been various calls in the local media for full disclosure of the contract between the government and ExxonMobil and its partners. The Minister had indicated earlier this year that the government does not believe full disclosure would be in the national interest.
ExxonMobil and its partners, Hess Corp and CNOOC Nexen, made a significant oil find back in 2015 after drilling the Liza Field in the Stabroek Block located about 120 miles offshore Guyana.
The oil company is currently in the developing phases of the Liza field with oil production projected for 2020.
Yesterday, Minister Trotman noted that signing onto initiatives like the EITI standard is part of building trust and better relationships as the country develops its oil and gas sector.
“I know there is a natural suspicion that governments are always up to something bad, something suspicious, (and) something that is unholy and unhealthy. But it is comforting to know that government has partners in both the industry and civil society to hold its hand, to hold their hands, so that together we can develop our resources in the best possible manner,” Minister Trotman said.
Guyana is hoping to join the EITI by year end. The EITI is an international standard that seeks to provide consolidated information on a country’s extractive sector. It aims to reconcile key revenue flows paid by companies with those received by government and assesses how the revenues are expended on behalf of the people.
The oil deal with ExxonMobil and its partners are being closely looked at because of worrying experiences faced by other countries with oil. Nearer to home, neighbouring Venezuela and Trinidad and Tobago, are but two countries which are facing major economic problems, despite being oil-rich.
Recently, Trotman had disclosed that while there is no rate of royalty agreed upon as yet, it is generally accepted that one percent royalty will not sit well with the Government.
Trotman was clear that “we would not be giving out too many details when it comes to government’s negotiations with Exxon at this point”. However, he said that this is not because government wants to hide anything. “As I said before, we have nothing to hide.”
However, he emphasised, “What I can say to you is that we are yet to agree on a rate of royalty.”
Trotman continued, “We are working on it, because the original agreement says a one percent royalty to be paid…which is tantamount to zero.”
Trotman indicated that Guyana is currently using a baseline figure of US$50 per barrel.
He said however that “the price of oil is very unpredictable. We have reason to believe that it may go to US$80, but I cannot say there is anything certain about that, but every dollar above, Guyana stands to benefit more, so we welcome any increase in the price of oil”.
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