Oct 31, 2020 News
Kaieteur News – Ramon Gaskin says that a judicial review of the Production Sharing Agreement (PSA) governing ExxonMobil’s Stabroek Block operations is necessary, and that he’s still hopeful that it could happen.
The activist made these comments during a recent edition of Kaieteur Radio’s Petroleum 101.
“It is my considered opinion,” he said, “having looked at and studied it carefully, and discussed it with legal people, that the production sharing agreement is flawed in law… It is illegal. Many parts of the production sharing agreement are not consonant with the laws of Guyana, including the Petroleum (Exploration and Production) Act.”
Gaskin had first advocated for a judicial review of the controversial 2016 agreement, late last year after identifying a series of provisions he determines to be illegal.
Gaskin is of the view that once the Court determines certain provisions to be in conflict with the law, it can strike them down and force ExxonMobil to come to the table to renegotiate those specific clauses.The contract was signed by former Minister of Natural Resources, Raphael Trotman. The contractors are ExxonMobil/Esso Exploration and Production Guyana Limited (Operator – 45%); Hess Guyana Exploration Limited (30%); and CNOOC Nexen Petroleum Guyana Limited (25%). Exxon is currently producing oil at the Liza-1 field, and has received approval to produce at Liza-2 and Payara.
Here are some of the provisions Gaskin considers illegal.
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.”
Gaskin had posited that the Act clearly denotes royalty as being payable on the petroleum “obtained”, instead of specifying “produced and sold”.
“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 during a forum last year.
Otherwise, Gaskin had 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 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 current President of the Transparency International Guyana Institute (TIGI) Fred Collins, about oil companies being allowed by the contract to self-insure, even though the law does not allow it. Earlier last 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 has drawn attention to the matter of “free” petroleum for Esso, as International Lawyer Melinda Janki has termed it. This refers 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 open-ended, operations is defined in the Act differently.
“Operations in the Act do not include those things that the agreement speaks about.” Gaskin had said.
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