By Abena Rockcliffe-Campbell
Money used to foot bills for luxury hotels, first class plane tickets and exquisite meals will form part the ‘cost’ to produce oil in Guyana. That cost is to be recovered by ExxonMobil before the oil giant declares profits.
Guyana and ExxonMobil have entered into a Production Sharing Agreement (PSA). In such an agreement, ‘Cost Oil’ is accounted for before ‘Profit Oil’ can be assessed.
‘Cost oil’ refers to the moneys or expenses to be deducted annually to recover defined costs. ‘Profit Oil’, is the amount of money to be split between the operator and the Government after expenses have been deducted.
There is already concern about the Government’s ability to verify the expenses ExxonMobil may say it incurred to produce the oil. PSAs usually detail what can be accounted for in cost recovery. Across the board, equipment to be used for drilling, seismic surveys and workforce is covered in cost oil. The more items that the government agrees can be accounted for in cost oil will result in a higher bill. The higher the expenses, the lesser the profits will be for Guyana to collect. There have been cases around the world of companies padding the bill for cost oil in order to secure higher profits for themselves.
Recently, Minister of Public Infrastructure, David Patterson explained the extent to which cost recovery goes for Guyana.
Patterson is a member of the Cabinet sub-committee that has been appointed to look at all matters relating to oil and gas. This committee is referred to as the quintet plus one, and also comprises Minister of Natural Resources, Raphael Trotman, Minister of State, Joseph Harmon, Minister of Business, Dominic Gaskin, Minister of Finance, Winston Jordan and Advisor to the President on oil and gas, Dr. Jan Mangal.
The quintet plus one recently went to Texas. Patterson said that the trip was to get an update on the progress being made by ExxonMobil.
He explained that updates are given every two to three months. For this reason, a team from ExxonMobil either comes from Texas to Guyana or a team of Ministers from Guyana goes to Texas.
“I can confirm to you that ExxonMobil paid for travelling and accommodation.”
“There are persons who may say that that (the trip) will influence us; but the reality is that it is (part of the) cost recovery.”
“If Exxon brings its entire team to Guyana, it goes in as cost recovery. If they send us and they pay, it all goes into cost recovery. That is how oil deals are done, whatever expense they incur it goes into cost recovery. Therefore, if they come every two to three months (the price for) all of that will be in the cost recovery which is part of the contract.”
Patterson then said that most of the content of the Contract signed between Guyana and ExxonMobil is in the public domain. “There is nothing secret. The issue about this contract has been aired over and over and I suspect it will continue to go over and over until the advisors and Exxon say it is okay to release the contract.”
Patterson said that the inquiring minds of the press may suspect there are some secret clauses in the contract “but there is not.”
“There is a non-disclosure clause in the contract and that is one reason why it cannot be released.”
He said that the second reason involves issues surrounding the border controversy.
He said that the government has been advised by its legal team that now is not an opportune time to release the contract. Patterson also made reference to the removal of Anadarko Petroleum Corporation from Guyana’s waters.
In October 2013, an armed Venezuelan navy vessel entered Guyana waters and forced a seismic survey vessel hired by Anadarko to cease its activities. The Venezuela navy detained the survey ship.
Patterson said that the contents of the contract signed between Anadarko and Guyana was used against the country.
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