By Kiana Wilburg
Now is the ideal time for Guyana to renegotiate its highly criticized Production Sharing Agreement with ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), Hess Corporation and CNOOC/NEXEN says Tom Mitro, Instructor and Co-Director at the University of Houston.
During an interview with Kaieteur News, the Senior Fellow with the Columbia Center on Sustainable Investment (CCSI), said that contract renegotiation at this point, before further significant investments are made, is fair to the contractor and would be in Guyana’s best interests.
The Consultant who has 45 years of experience in management and instruction of petroleum financial, commercial and government related activities said, “This is the ideal time to do it. Not only is it a time when the company needs approvals but it is fair for the company too.
“If there is going to be a change of contract terms, do it now. It is better to do it before a vast majority of investment is made.”
Mitro, who previously worked for 32 years for Gulf Oil and Chevron, reminded that agreements around the world are always changing. The University Instructor said that operators always push for Stabilization clauses to be embedded in contracts.
He explained that those clauses are there to ensure that if the government agrees to certain concessions and that it will take a certain share of profits along with royalty, then they can never change those terms no matter what happens.
“But the reality is, as soon as something happens in the market, the companies are first to knock on governments door asking for changes,” the Instructor added.
While noting that contract renegotiation based on mutual agreement is the normal way to do it, the Consultant stressed that the ideal time for Guyana to get this done is now.
In addressing apprehensions to broaching Exxon with the topic of renegotiation, Mitro categorically stated that the American super major and its partners would not walk away because better terms are being demanded.
In this newspaper’s Sunday publication, the Senior Fellow with the Columbia Center on Sustainable Investment (CCSI) said, “You can safely say, and write this down, ‘Exxon will not walk away from Guyana, no matter what. They have no other opportunity like this in the world…”
The Consultant said that even if ExxonMobil walked, which is highly unlikely; there are many other reputable companies that would willingly come into the sector.
The Senior Fellow with the Columbia Center on Sustainable Investment said that this project under current terms and relatively low oil prices will bring great returns for ExxonMobil. Mitro said that Guyana can adjust and tweak terms in the contract so that it works for both parties.
He concluded that trying to force a deal that does not work for both parties has implications.
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