Activist, Ramon Gaskin, intends to challenge the controversial Production Sharing Agreement (PSA) that governs the operations being undertaken by in the lucrative Stabroek Block, via a Judicial Review.
The contract, signed by the Government of Guyana and ExxonMobil’s subsidiary, Esso Exploration Production Guyana Limited (EEPGL), has been criticised as being riddled with illegalities.
During ‘A Fair Deal for Guyana’, a forum held at the Critchlow Labour College last Thursday, Attorney-at-Law Melinda Janki was joined on the panel by Fred Collins of Transparency International Guyana Institute (TIGI), and Gaskin.
The panel, after presenting on a series of deficiencies in the contract, was asked whether it can be renegotiated.
Janki responded by reading a provision of the contract, which states “Except as may be expressly provided herein, the Government shall not amend, modify, rescind, terminate, declare invalid or unenforceable, require renegotiation of, compel replacement or substitution, or otherwise seek to avoid, alter, or limit this agreement without the prior written consent of contractor.”
The contractors are Esso (Operator – 45%); Hess Guyana Exploration Limited (30%); and CNOOC Nexen Petroleum Guyana Limited (25%).
Without Esso’s approval, Janki said that there can be no renegotiation of this contract.
But she, like fellow Attorney-at-Law, Christopher Ram, pointed out that the law takes precedence over any contract. That implies that, if there are illegalities in the contract, it is necessary to challenge those illegalities in Court and have them brought into conformity with the law.
Gaskin said he was advised that it would cost about $1M to put the contract under judicial review. In that very moment, he pledged $100,000 to the cause. One person in attendance pointed out that if 1,000 persons contributed $1,000 each, Gaskin would have enough money to fund the review. By the indication that the activist had started a fund for the initiative, persons started immediately started to donate to the cause. Gaskin had collected several $1,000 and $5,000 bills by the end of the forum.
One of the illegalities, claimed Gaskin, is a difference between the royalty provision of the PSA and that of the Petroleum (Exploration and Production) Act.
The PSA states that the contractor shall pay a royalty on the petroleum “produced and sold.” The provision allows the contractor to take as much from the production as is needed for its operations, in terms of fuel and transportation.
On the other hand, Article 45 of the Petroleum (Exploration and Production) Act, states that the Contractor shall pay “to the Government royalty in respect of petroleum obtained by him in the production area to which the licence relates.”
“So there’s a difference between the agreement and the Act, on this question of how royalty is to be charged. The Act is clear. They used the verb ‘obtained’. If you obtain it, you pay,” Gaskin said.
Otherwise, Gaskin raised the issue of Esso being granted more blocks on the licence than the law allows. A licence should hold a maximum of 60 graticular blocks (a mode of land measurement, approximately equal to 5,073 sq. km), according to law, but the licence grants Esso and its partners approximately six times what the law allows. In fact, research conducted by Kaieteur News agency indicates that almost all the oil companies holding an offshore prospecting licence were awarded, and continue to hold, way more blocks than they are legally entitled to.
There is also the matter, raised by Collins, about oil companies being allowed by the contract to self-insure, even though the law does not allow it. Earlier this year, Head of the Department of Energy, Mark Bynoe, said that discussions had been initiated with Central Bank to ensure oil companies comply with the nation’s laws on having a recognised insurance policy. Bynoe had said that there will be no approval for oil companies to self-insure, explaining that the contract will only allow the Contractor to self-insure if the Minister grants a waiver.
Gaskin also drew attention to the matter of “free oil” for Esso, as Janki put it. He referred to the section of the contract that allows the contractor to take as much as it is needed for its operations.
Janki had said that the quantity of the production that the companies are allowed to take covers all the prospecting operations and all the production operations that they carry out. Gaskin said that while the definition of operations in the contract is so open-ended, operations is defined in the Act differently.
“Operations in the Act do not include those things that the agreement speaks about.” Gaskin said.
The three panelists shared differing views on what should be done with the PSA. Janki is of the view that Guyana should not produce oil at all. She said that, due to harm the extraction and production of fossil fuels does to the environment, and with efforts beginning to be focused on weaning the industrial world off of fossil fuels, it would be better for Guyana to leave oil in the ground. Gaskin disagrees with Janki, and asserted that the oil should be extracted. But he said that first; the contract must be ripped up and rewritten from scratch. Collins said that the contract should not be ripped out, only regularised so that it is inconformity with the law.
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