It is important to maintain the sanctity of contracts, like Production Sharing Agreements signed by Governments with oil and gas companies.
But what is more important is ensuring that the citizens of a country receive value for the exploitation of the resource. If conditions become so different that the people aren’t benefiting as much they should, then renegotiation is reasonable.
That is the opinion of Keith Rowley, Prime Minister of Trinidad and Tobago.
During Spotlight on Energy, a TV programme the government initiated to discuss energy issues in Trinidad and Tobago, PM Rowley spoken about the country’s plan to engage the shareholders of Atlantic LNG, a liquefied natural gas producing company.
His administration had found that there was a need to discuss better terms and conditions for improved revenue for Trinidad and Tobago from LNG sales.
“There’s a role for the government,” he said, “is ensuring that the people of Trinidad and Tobago, while being participants in this very lucrative business, get more than crumbs that fall off the table.”
The government of Trinidad and Tobago had seen willingness by those in the industry, according to Rowley, to negotiate. He said that “there’s a willingness not to treat contracts as cast in stone.”
When Rowley’s government assumed office, it appointed a Cabinet Standing Committee on Energy, with the responsibility for managing the energy sector via Government direction and policy. This committee studied a report that painting a very discomforting picture for T&T.
The report shed light on the country’s declining gas reserves, and the loss of value from LNG sales over the years, compared to other gas producing nations. The administration had concluded that the sector was in crisis.
With a series of issues facing the sector, Rowley decided that it was necessary to seek renegotiation.
The administration appointed a new board to the National Gas Company of T&T (NGC), after which NGC set out to negotiate new gas supply agreements and remedy other issues the sector faced.
On June 6, last, Rowley made a statement on his meeting with those energy companies, at a post-Cabinet press conference.
Rowley said that months of challenging negotiations resulted in a new pricing formula that all came down to better revenue for Trinidad and Tobago, and other quite favourable conditions.
“The Government’s Empowered Negotiation team over one year has successfully negotiated a complex deal with two major energy players, BP and Shell. The parties went into the negotiations with something of value and found a way forward that gives us all the equitable returns that we are entitled to.”
He explained in March last year that contracts bind the signees to terms and conditions. But in this regard, he told the conference that if the conditions in question “have changed so drastically and so detrimentally, then the reopening and renegotiation of contracts is a reasonable demand.”
In Guyana, there have been calls from certain sections of the public for renegotiations to Production Sharing Agreements.
A contention by the Transparency Institute Guyana Initiative (TIGI) is that the PSA Government signed with Exxon’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) for the Stabroek Block, is “illegal, irretrievably flawed” and “either the result of grand corruption or grand incompetence.”
TIGI stated that the PSA is in contravention with the Constitution and the Procurement Act. The Institute also complained about the lack of ring-fencing provisions in the contract. It stated unequivocally that a document which is “in breach of international practice as well as local laws” would be “invalid, void and of no effect.”
The current APNU+AFC administration is concerned that renegotiating contracts would scare away investors. But Tom Mitro, Instructor and Co-Director at the University of Houston, told Kaieteur News that negotiation is quite natural.
Mitro stated, quite frankly, “Exxon will not walk away from Guyana, no matter what.”
He said that the time to renegotiate is now.
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