Canje owners can bring Govt to renegotiate gas terms, but Guyana can’t bring them to get a better deal

Oct 25, 2020 News

“The fleecing of Guyana ” Series…

– Contract signed by Ramotar

Kaieteur News – The Canje agreement signed by former President Donald Ramotar obligates Guyana to go back to the negotiating table with the Contractor if it believes that the terms must favour oil companies more so as to “economically commercialise” the production of the gas. Yet, if Guyana ever determines that it is unfair that it must repay the one percent royalty or that any other provision of the agreeent is so unfair that it should be rectified, the Contractor is held to no such obligation to come to the negotiating table.
The one-sided provision exists in Article 12.2 of the Agreement, which speaks to handling of Non-Associated Gas. This refers to gas which is produced from natural gas wells, as opposed to Associated Gas which is produced from oil wells.
It states “When the Contractor … has informed the Minister of any Non-Associated Gas discovery within the Contract Area that is of potential commercial interest, the Contractor shall inform the Minister whether the Contractor believes such discovery is potentially commercial under the current Agreement terms. If the Contractor believes that the fiscal terms will have to be revised in order to economically commercialise the Non-Associated Gas discovery, the Contractor shall propose revisions to the fiscal terms as the basis for entering into good faith negotiations to reach mutually acceptable terms for developing the Non-Associated Natural Gas discovery.”
In this regard, the government will be held to an obligation to negotiate with the Contractor to decide on project economics that gives a rate of return no less than eighteen percent (18%). In the event that the parties cannot agree to a revision of the terms, they must engage a “sole expert” to render a decision on the terms.
If the Contractor does not want to move forward with the sole expert’s decision, it can decide to abandon the gas discovery, and relinquish it to the government.
This provision stands in contrast to the rigid stabilization clause of the contract, which prevents Guyana from imposing any new tax or other charge on Mid-Atlantic and its partners, Exxon, Total and JHI Associates. If Guyana determines that the deal is unfair, the Contractor has no obligation to come to the table. Even if Guyana alters its own legislation, customs code or tax code in a manner that changes the project economics of the Contract, Guyana is obligated by the Contract to exempt the Contractor from the amendment.
Ramotar signed off on the stabilization clause, which states “the Government shall not increase the economic burdens of the Contractor under this Agreement by applying to this Agreement or the operations conducted thereunder any increase of or any new taxes whatsoever, any new royalty, duties, fees, charges, value-added tax (VAT) or other imposts…”
The agreement is riddled with terms labeled by industry experts as unusual, some of which have been exposed in the past week’s series on the contract. The license for the Canje Block was first given to Mid-Atlantic Oil & Gas Inc. ExxonMobil has since farmed-in as the Operator, as well as JHI Associates and Total SA. The circumstances under which the award and subsequent farm-ins occurred are littered with red flags which anti-corruption experts say warrant investigation.

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