The government is becoming jerky and jumpy… and all too easily. This reaction is a symptom of discomfiture over being bombarded with criticisms over the agreement signed with ExxonMobil.
The government is overreacting and overreaching in its reaction. The latest example of its overreach is an insulting one-line statement, not even worth the effort to produce it, which was issued by the Ministry of the Presidency, attempting to distance itself from comments made by the Presidential Adviser on Petroleum, Dr. Jan Mangal.
The one liner read. “The Ministry of the Presidency puts on record that Dr. Jan Mangal, Presidential Advisor on Petroleum, is not authorised to speak on behalf of His Excellency, President David Granger or the Government of Guyana.”
The President should enquire as to who authorised such a statement since it is highly ridiculous. The public does not need a reminder that a Presidential Advisor cannot speak on behalf of the President of the country. But there is nothing to say that he cannot explain the positions of the government.
Therefore, the attempt of the Ministry of the Presidency to distance itself from Dr. Mangal’s comments made at a forum organised by the University of Guyana is sending a message that the government has lost its bearing. It is becoming touchy and super-sensitive about statements which it falsely believes can be perceived as criticisms of the contract it negotiated with ExxonMobil.
The more central issue which the Ministry of the Presidency needs to address is what it is that Dr. Mangal said that is in contradiction to the government’s position.
Dr. Mangal said that the Production Sharing Agreement (PSA) can be renegotiated. This is not a falsehood. This is not a criticism of the government. It is not a demand for the government to renegotiate. It is a statement of fact which is shared by many persons – that contracts can be renegotiated.
This is what Dr. Mangal is quoted as saying to the gathering at the University of Guyana event. “Contracts are always changed. A contract is an agreement between two people. Both parties need to be comfortable. If one party becomes really uncomfortable it will be changed.”
He also reported as saying that Guyana is a sovereign country and the evidence around the world is that contracts can be renegotiated as the situation changes. What is so objectionable about this?
He noted that contracts should always be reviewed as new information becomes available. “Look at the price for natural gas…people sign contracts for natural gas at a very high price. The price of gas has dropped internationally, people are renegotiating those contracts. A contract is an agreement and people need to be comfortable with it.”
In response to a question, Dr. Mangal was quite circumspect when he said that the question of renegotiating the contract is for the people of Guyana. This was an honest answer and can in no way be construed as a call for a renegotiation of the contract. But when a government is besieged by criticisms, it cannot think straight and so it makes false inferences and deductions.
Dr. Mangal also said that the 2% royalty in the current agreement is not the international norm. “Royalty when you look around is more between 10% and 20%,” he is quoted as saying.
What is objectionable about this? The government has virtually conceded that the royalty it negotiated was low but it said that in 1999 the royalty negotiated was 1% and it managed to double it to 2%. The government is also not denying that the international norm for royalties is far higher. So there is no contradiction here.
ExxonMobil enjoys a virtual tax holiday. The government is not hiding the tax concessions it gave to the companies drilling and producing the oil. It has made these concessions public.
All Dr. Mangal pointed out was what is known already and that is that taxes are usually around 20-30% and in some jurisdictions higher. He acknowledged that the production split of 50-50 is not too bad. So what is wrong about indicating the prevailing international norms?
He also is reported as advising that countries should set strict and robust rules for spending so as to avoid abuse. Is this a view which the government has an issue?
One-liners can be jokes. But that one line statement issued by the Ministry of the Presidency is no joke. It has effectively made the position of Dr. Jan Mangal untenable. He should stay clear of this government. It does not understand, as yet, how to deal with professionals.
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