Jan 25, 2018 News
While it is true that USA Oil giant, ExxonMobil is granted the privilege of importing an unlimited number of items, this provision is nothing new. In fact, it is a practice that is observed by many countries.
And that is not all, what makes this arrangement even better for Guyana is that the equipment and the installations built by the oil operator will become the property of the Government.
In summary, this is the position which was offered yesterday by the Ministry of Natural Resources. Its response comes on the heels of a news item that was carried by Kaieteur News on Tuesday with the headline, “Govt. pre-approves uncapped importation for ExxonMobil.”
The news article exposed the fact that ExxonMobil and all its affiliates engaged in Petroleum Operations shall be permitted to import, free of duty, VAT or all or any other duties, taxes, levies or imposts, all equipment and supplies required for Petroleum Operations. There is a list of all these items that can be imported by ExxonMobil in Annex D of the contract.
The Ministry believes however that the article reflected a lack of industry specific knowledge and an understanding of the basic principles of the contract regimes in oil and gas.
The Ministry of Natural Resources said that Guyana’s agreement with ExxonMobil, Hess and CNOOC Nexen is a Production Sharing Agreement (PSA) which is not dissimilar to such agreements in other parts of the world and which contain the same or similar incentives.
“The primary reason why, for example, China, Azerbaijan, Angola, Ghana and almost every country (a list will be provided) who utilise a PSA exempt Export and Import Duties on materials and equipment specific to upstream petroleum operations is that OWNERSHIP of such, the equipment and the installations built, become the property of the host government.”
The Ministry in this regard, requested that Kaieteur News acquaints itself and reporters with Article 20 of the contract.
ARTICLE 20 ‑ RIGHTS TO ASSETS AND INSURANCE
20.1 Rights to Assets
(a) The Contractor shall have the right to use free of charge assets previously installed by the Contractor in relinquished areas which are required for its operations in the remaining portion of the Contract Area provided that in the event of re-licensing of the relinquished area, such licence shall exclude the aforesaid assets.
(b) Subject to Article 20.1 (c) upon expiry or termination of this Agreement in accordance with the provisions hereof, the Contractor shall upon notification by GGMC pursuant to Article 20.1 (d) (i):
(i) deliver to the Minister, free of charge, in good order and condition, (fair wear and tear excepted) all installations, works, pipelines, pumps, casings, tubings, engines and other equipment, machinery or assets of a fixed or permanent nature constructed, used or employed by the Contractor or the Operator in the Contract Area;
(ii) deliver to the Minister, free of charge, any fixed assets relating to Petroleum Operations outside the Contract Area and movable assets owned by the Contractor or Operator and used or employed in connection with Petroleum Operations and located in Guyana for which costs have been fully recovered in accordance with Annex C herein; where costs have not been fully recovered the provisions of Article 20.1 (b)(iii) shall apply;
(iii) sell to the Minister any other assets owned by the Contractor or Operator and used or employed by the Contractor or Operator in the Contract Area or elsewhere in Guyana in connection with Petroleum Operations at a price equivalent to the unrecovered cost of the assets.
NOTHING BUT JUNK!!!
After reviewing the Ministry’s statement, Chartered Accountant, Chris Ram said that Minister of Natural Resources, Raphael Trotman, who he is sure had some input in the release to the media, is selectively quoting the contract
Ram noted that 40 years later when the life of the projected is expected to come to an end, the materials which would have been imported would not only be “hand-me-downs” but of little or no value to Guyana. The Chartered Accountant said that Guyana would essentially be inheriting “junk.”
“What will you do with the materials, equipment etc when they are finished with it 40 years later? (What) the people (are) practically saying in the contract is ‘when we finish using something all yuh could tek it’. In other words, we are inheriting their junk.”
The Chartered Accountant said it would be foolhardy for Minister Trotman to think otherwise.
The Attorney-at-Law reminded that Annex D of Guyana’s contract with ExxonMobil speaks to all of the uncapped items which the oil operator can import. Contrary to what the Ministry states, Ram stressed that there is no similar provision which exists in oil and gas contracts signed in China and Ghana.
“There is no such provision in the Ghana agreement. Tullow (Oil plc) has published its agreement in Ghana. There is no corresponding Annex D; and same thing with China.”
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