Jan 01, 2021 News
Kaieteur News – Vice President, Dr. Bharrat Jagdeo takes issue with the fact that some of the wording of the Stabroek Block Production Sharing Agreement (PSA) creates the impression that ExxonMobil and its co-contractors have sovereignty over Guyana.
“I do have problems with making it seem as though Exxon has sovereignty within a sovereign nation. I do have problems with that kind of configuration,” the VP said, “and some parts, wording of the contract confers or creates that impression that they have sovereignty over the country.”
At the time of making this statement, Dr. Jagdeo was engaged in an exchange with Kaieteur News publisher, Glenn Lall on the Kaieteur Radio Show, Guyana’s Oil & You, hosted by Senior Journalist, Kiana Wilburg.
Lall questioned Dr. Jagdeo about the limitations the oil contract places on Guyana’s right to inspect Exxon’s operations and audit the oil companies’ books. The terms of the contract require advanced notices, which have been widely criticised as being lengthy and restrictive.
Dr. Jagdeo said it is only reasonable that companies be notified of intent to audit or inspect. He said any business would expect the authority to notify it. However, “I have issues with the long-term notice, because we are a sovereign country and companies that operate here must comply with our law,” the VP said. “And if our system says that we are doing an audit, you have to comply with the audit. That is the law of Guyana.”
Under the Production Sharing Agreement (PSA) that ExxonMobil signed with the Government, the Government through the Minister with responsibility for petroleum has the right to audit the company’s books. However, that right was granted along with some restricting measures – one audit per year, with three months written notice of intention to audit.
These measures are outlined in Article 23 and Annex C of the contract. Article 23 is limited and defers to annex C of the contract. Annex C goes more in detail of the accounting and auditing measures. Annex C has an “Audit and Inspection Rights of Government” clause.
That clause states that the Minister “shall have the right to audit upon ninety (90) days written notice, at his sole cost and expense, accounts and records of the Contractor, maintained hereunder with respect to each Calendar Year within two years from the end of each such year.”`
The contract states that the Minister may audit, examine and verify, “at reasonable times during normal business hours but not more than once per Calendar Year, all charges and credits relating to the Contractor’s activities under the Agreement and all books of accounts, accounting entries, material records and inventories, vouchers, payrolls, invoices and any other documents, correspondence and records necessary to audit and verify the charges and credits.”
During the annual audit, the Minister has the option to review items previously subjected to audit in earlier years. According to the PSA, that the former administration signed, Guyana must give ExxonMobil seven days’ notice before his visit, and must carry out the visit at its own expense.
This is enshrined in Article 9 of the contract, which speaks to records, reports and information.
Article 9 (e), for example, states: “The Minister, through duly appointed representatives, upon providing the contractor with at least seven days’ notice, shall be entitled to observe the petroleum operations conducted by the contractor at his sole cost and expense and at all reasonable times to inspect all assets, records and data kept by the Contractor relating to such petroleum operations. In the exercise of such rights under this paragraph, the Minister shall not unduly interfere with the Contractor’s petroleum operations under this agreement.”
In January 2020, former Head of the Environmental Protection Agency (EPA), Dr. Vincent Adams reported that the EPA would include a provision in the environmental permits granted to the companies, which allows officials to visit the company’s Floating Production Storage and Offloading (FPSO) vessels without prior notice. He had said that Guyana does not have the resources to fully utilise this provision, but that that would not be a permanent situation.
Another contentious provision, which has received criticism, is the Stability Clause of the oil contract – Article 32. Attorney-at-Law, Christopher Ram had said in 2018 that one gets the distinct impression that ExxonMobil went above and beyond to strangle Guyana’s Parliament and future governments with the use of the rigid stability clause.
It states that, “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 the contractor.”
The anticorruption advocate had said that the PSA only serves the interest of Exxon Mobil as it limits the role of the government in applying new laws made in the petroleum sector. Ram revealed that if Guyana were to amend any of its laws, which would affect the entity’s operations, the Government would have to restore the benefits so lost.
The contract reads, “After the signing of this agreement and its conformance with Article 15, the Government shall not increase the economic burdens of the contractor under this agreement by applying to this agreement or the operations conducted hereunder any increase of, or any new petroleum related fiscal obligation, including but not limited to any new taxes whatsoever, any new royalty, duties, fees, charges, VAT or other imposts.”
Also, the contract states that if at any time after the signing of this agreement, there is a change in the Laws of Guyana whether through the amendment of existing laws or the enactment of new laws or a change having the force of law in the interpretation implementation of application, ExxonMobil must not be affected.
Guyana agreed that despite whatever may change, ExxonMobil must receive the “same economic benefit under the agreement that it would have received prior to the change in law.”
The contract compels Guyana to resolve “promptly” and by “whatever means may be necessary” any conflict or anomaly between this agreement and any such new or amended legislation including by way of exemption, legislation, decrees and or other authoritative acts.
Ram noted that the Stability Clause provides, inter alia, “that any delay by the government to respond to any notification from the contractor that they may have suffered any adverse effects can result in the contractor taking the matter to arbitration.”
The Chartered Accountant added, “In such a case, the arbitral tribunal is authorised to modify the agreement to reestablish the economic benefits under the Agreement to the Contractor. Where such restoration is not possible, the tribunal has the power to award damages to the Contractor that fully compensates for the loss of economic benefits under the Agreement, both for past as well as future losses.”
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