There is no sharing in Exxon’s Production Sharing Agreement

Feb 02, 2018 ExxonMobil

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– Have some compassion and renegotiate–says Accountant, Nigel Hinds
By Abena Rockcliffe-Campbell

If one adds the collective losses from contracts that were mismanaged; investments that fell through, like the glass factory under Burnham and the Skeldon Factory under Jagdeo as well as the Marriott; if you also consider all that was given in bailouts and loans to agencies that had to be written off; those losses will pale in comparison to what we have given away with this single Exxon oil contract.
That is the perspective offered by Accountant, Nigel Hinds.
Hinds said that there is no sharing in what is being called a Production Sharing Agreement. He said that it seems like every line in the agreement favours ExxonMobil.
“This is a lopsided, one-sided agreement. Calling it a PSA is virtually insulting and demeaning the meaning of sharing.
“If you have an entire cake and you give someone the crumbs you cannot then say you shared it,” said Hinds.
The Accountant said that Guyana will still be better off when oil starts to produce but not as good as it could have been if Guyana had a fair agreement.
“I would have rather an agreement that, at least when you examine it, is respectful of the intellectual capacity of Guyanese. We are not focusing on who might have gotten what benefit under the table.
“That does not come into play. It is just that the contract itself is so offensive to your senses. We have people who know better. What caused them to sign onto this contract is baffling.”
Hinds said that there are many issues in the contract. He point to a few. He noted that litigation is to be included in cost recovery. “You cannot put a value on the fact that we are responsible for litigation. Those are things that are meaningful and could result in losses occurring.”
Hinds said that the two percent royalty is “ridiculous” and the US$18M signing bonus is “horrendous”
The accountant noted the “Stability of Agreement” clause in the contract ensures that even if Guyana modifies its financial laws or introduces more taxes, ExxonMobil will not have to confirm to any of those changes.
Zeroing in on the signing bonus, Hinds said, “Exxon pays about US$12B a year in dividends but we receive from them, US$18M for a discovery that is expanding almost quarterly. We have in our waters approximately10 percent of Exxon’s identifiable recoverable reserves. The US$18M is an insult to intelligent Guyanese minds as well as to the people of Guyana who are depending on our more learned citizens to represent the nation’s best interest.
“This contract is bad from almost every angle. And, it reflects very badly on the competence of the administration…There are Guyanese businesses that could have given US$18M.”
Hinds said that the “open ended concessions” are a concern to him. He noted also that ExxonMobil’s affiliates can get the same concessions it is getting.
Hinds called on ExxonMobil to at least “have some compassion” and consider renegotiating the contract.
The accountant said that the contract represents an abuse of power. “They took advantage of a neophyte administration. Exxon is a global conglomerate touching all continents.”
He said that he is well aware that ExxonMobil is not in the charity business. “They are hardcore business people but they need to see the wrong and have compassion.”
Hinds continued, “What happened here was horrendous; it is terrible. Anybody with commonsense would tell you the two percent royalty and 75 percent cost recovery a year cannot go together.
Hinds said that Guyana’s contract is poor even when compared to that secured by countries like Ghana and Angola.
He said that the pronouncements made about the contract by the International Monetary Fund (IMF) tell a worrying story.
ExxonMobil has to reconsider, Hinds said. He continued, “Even businesses have obligations to be proper; they must know that.”
Hinds said that ExxonMobil knows the lucrative nature of the find. “Our oil is described as light crude, sweet oil. It is cheaper to process; you can get a good price; it is not heavy oil.”
The Accountant said that knowing what it is getting, ExxonMobil should have at least been a little kind.
Hinds said that there is no indication that Guyana’s representatives made a single input that would benefit the nation.
“It seems as if ExxonMobil just drafted the contract and we just signed it. I cannot believe anyone with a vision, and I mean literally vision; someone who can see, would actually sign a contract like that. It is the worst.”

Hinds said that he thinks Guyana went to the table unprepared. “Instead of going prepared for a test match, we went in, prepared for a game in the little league, a grade school operation.”
Hinds continued, “You do not put donkeys in the Derby; you cannot compare our negotiators with what Exxon represents. Exxon is a pillar of the United States. It is an empire.
“ExxonMobil is taking on the US Justice Department. It has got its tentacles in every sphere of the US government, from the congress to all those private environmental organisations in different countries.
“We are talking about mass leverage. Exxon is too big to fail. Guyana is a third world country with rookie ministers, people with no background in negotiating and operating at this scale.”
Hinds said that he is not “bashing Exxon but I think if they have any conscience at all they would stabilise this contract and make it a bit more palatable to the Guyanese people. In its current form, this is a disastrous contract.”
Hinds also said that the international community and the local press “should make every effort to force renegotiation of this contract.
“Everything has been given away. I am not calling the Marriott good or bad but when you look at the Marriott give-away, it pales in comparison.”

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