Jan 11, 2021 News
Kaieteur News – There has been much conversation regarding the need for urgent renegotiation of the lopsided Stabroek Block Production Sharing Agreement (PSA) between Guyana and petro giant ExxonMobil. But Chatham House Associate Fellow, Dr. Valerie Marcel holds the view that contract renegotiation may not be the only avenue available for Guyana to secure more favourable terms.
In light of the depressed state of the oil market following the COVID-19 pandemic, the Chatham House Expert explained that oil companies are facing tremendous pressure from investors to focus only on those projects which are economical and where possible, has low sulphur content. In these circumstances, she said that companies will be at the government’s doorstep looking for amendments or quick approvals. Dr. Marcel said that this presents many opportunities to Guyana to bring companies to the table to get concessions that are much more beneficial to the country.
“Every time they ask for an extension, every time they want to avoid a penalty, every time they come back asking for something…and the companies are always coming back asking for something, each one of those opportunities is a moment to negotiate something and to trade for something you want. So I don’t think [renegotiation] is that important,” Dr. Marcel said during a recent interview on Kaieteur radio’s programme, “Guyana’s Oil and You”.
Over the past five years, Kaieteur News would have reported that Guyana left billions of dollars on the table when it negotiated the 2016 deal with ExxonMobil. To make matters worse, the deal is fraught with numerous provisions, which leave the country open for abuse. These include pre-contract costs discrepancies; taxes that are paid by Guyana on behalf of the oil companies; unspecified interest rates expensed to Guyana for loans taken by the oil entities; weak provisions on the protection of the environment etc.
“I understand how frustrating it is for Guyana to be in an unfavourable contract…[But] renegotiating an existing contract isn’t sort of the panacea it could be presented (to be),” she said.
Moreover, Dr. Marcel highlighted that while much focus is placed on the terms of a contract, it is pertinent to note that the way a project is designed contains opportunities for countries to retain “big value” as well.
“I want to emphasize that I think the project design is much more (important)…that’s where the big value is. It is not the sexy part of the discussion but that is where the big value is,” Dr. Marcel noted.
She pointed out that the Payara Field Development Plan (FDP) was one avenue for Guyana to capture value. But this was heavily dependent on whether government possessed all the necessary tools, time and capacity to ensure that the project was developed in the best interest of Guyana, the Chatham House Fellow concluded.
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