Apr 14, 2018 News
By Abena Rockcliffe- Campbell
The International Monetary Fund (IMF) has alerted the Government of Guyana to the fact that it has entered into a unique and disadvantageous agreement with oil giant ExxonMobil. Specifically, the IMF has noted that the profit sharing regime agreed to, is one that is very uncommon in the world, and will rob Guyana the chance of being able to have a greater share of profit, relative to the success of the oil project.
This was highlighted in a Technical Assistance Report that the IMF handed to the APNU+AFC government in November last year. The government has refused to make the report public; however, this newspaper was able to view a leaked copy.
In 2016, the APNU+AFC government renewed the Production Sharing Agreement (PSA) that Guyana has with ExxonMobil. That contract has been highly criticized by concerned experts and others in the know who believe that the country has basically given away its patrimony. But the government has never agreed. Most ministers are on as record saying that Guyana has been given a good deal. They said this even after viewing the IMF report.
One of the many areas in the ExxonMobil contract that the IMF pointed out as disadvantageous to Guyana is the regime for profit-sharing.
The IMF noted that the government’s share of profit oil in the ExxonMobil contract is fixed. The international body said that this is uncommon.
“A fixed government share of profit oil, 50 percent in the case of the Stabroek agreement, is uncommon in modern PSAs. The main disadvantage of this type of sharing mechanism is that it does not provide an increasing share of profit oil/gas to the government linked to the profitability of projects,” the report stated.
The IMF said that most PSAs around the world usually have a formula in which the government’s share increases as a function of production, a combination of production and prices, or an economic variable such as the ratio of cumulative revenue to cumulative costs, or the project’s internal rate of return.
“Moreover, in many countries, the top tier government share of profit oil could be as high as 80 or 90 percent.”
Of the contacts released by government so far, the share offered in the ExxonMobil contract is the lowest. ExxonMobil is accompanied by Ratio Energy as that company is also offering government a 50 percent share.
The CGX contract highlights a 53 percent share for government and 47 percent for the oil company.
The Eco-Atlantic/Tullow contract has a sliding scale, providing an increasing share of profit for Guyana. However, the highest share offered to Guyana is 60 percent. This is nowhere near to the aforementioned 80 or 90 percent share which the IMF noted, is enjoyed by some countries.
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