-But leaves Guyana trapped in straitjacket provision
Stabilization provisions protect oil companies from governmental or legislative changes that may affect any contract term. It grants the oil company compensation from the host government for any added costs due to future legislative changes.
This provision is just one of the controversial features of the Production Sharing Agreement (PSA) Guyana has with ExxonMobil.
Local critics believe that in Guyana’s case, ExxonMobil went above and beyond to strangle the nation’s parliament and future governments with the use of a most rigid stability clause.
What also lends credence to the aforementioned concern is a discovery that was made during the examination of the PSA ExxonMobil has with Liberia. During an assessment, one quickly observes that the oil company was not able trap Liberia in a straitjacket stability clause in which Guyana finds itself.
In the Liberia PSA, the company agrees that there can be amendments to the stability clause in the case of “profound change in circumstances.”
The oil agreement in that regard notes that the State and the Contractor shall meet if the State or the Contractor gives at least 45 days’ notice to the other that it reasonably considers a Profound Change in circumstances to have occurred.
At the meeting, the State and the Contractor shall review the relevant facts and circumstances and determine whether a Profound Change in Circumstances has occurred.
“To the extent that a Profound Change in Circumstances has occurred, the State and the Contractor shall enter into good faith discussions to consider and shall make such modifications to the Contract as they may through good faith discussions propose as necessary or appropriate to restore the economic, fiscal and financial balance of the Contract.”
The contract also defines what may constitute a “Profound Change in Circumstances.”
It notes that this refers to changes arising since the Effective Date of the contract in the economic conditions of the petroleum industry worldwide or in Liberia, or such changes in the economic, political or social circumstances existing in Liberia specifically or elsewhere in the world at large as to result in such a material and fundamental alteration of the conditions, assumptions and bases relied
upon by the Parties at the Relevant Date that the overall economic, fiscal and financial balance reasonably anticipated by them will no longer as a
practical matter be achievable.
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