Kaieteur News – In October 2019, then Opposition Leader, now Vice President of Guyana, Dr. Bharrat Jagdeo, was reported as recommending that no further concessions should be granted to oil companies until Guyana’s model Production Sharing Agreement (PSA) is complete. The reason for taking this stance was because the contract with Exxon had set a precedent for how contracts are made with other companies.
Slightly more than a year after saying that, the Exxon contract sets a precedent. He is now saying that any new contracts would have to be on better terms than what was obtained for the Stabroek block. Surely, he ought to know that if the Exxon contract set a precedent, then it is going to be very difficult for any PPP/C government to demand more favourable terms than what Exxon and its partners obtained for the Stabroek block.
Setting a precedent means that the Exxon contract has become the benchmark by which other oil companies will negotiate with the government. They will demand no less favourable conditions. Is this not what setting a precedent means?
Why then should anyone take seriously the idea that the PPP/C will be able to extract better terms for other oil blocks? It certainly did a terrible job with the Payara permit.
Jagdeo also on October 2019 acknowledged that any government has the power to review any oil contract when it meets the production stage. This is what he said then, “If this government found reason to renegotiate the Exxon contract and make it even more lucrative, in my view, than 1999, there has to be a reason why we can review all those exploration contracts that were issued when we come to the production stage because now we have five billion barrels of proven oil out there.”
The PPP/C was handed a golden opportunity to renegotiate the Stabroek contract when the oil companies came to the PPP/C government for the approval of the Payaya Development Plan. The PPP/C had the opportunity to demand better terms then because Exxon was banking on that approval. The government, however, squandered that opportunity. It backtracked on the opportunity to claw back greater concessions from the oil companies. The PPP/C retreated from Jagdeo’s stated position that the government has a basis for reviewing all exploration contracts when it comes to the production stage.
The new model Production Sharing Agreement, which the PPP/C is developing, is only of academic importance. The Canje and Kaieteur oil blocks are not likely to be subject to that model production sharing agreement because Exxon has already started to buy-in to those blocks. And Exxon already has a production sharing agreement, which does not limit its operations to any one block.
All the talk therefore about new negotiations when the model PSA is developed is hot air. The oil blocks have been handed out and those persons, into whose hands it has landed, are most likely going to have the oil companies, with existing PSAs, buy into the oil blocks. In other words, these oil blocks are going to become the subject of speculation.
According to a news report, Jagdeo is also suggesting that the oil companies rent property rather than build. It may be his way of trying to promote local content. But he seems to have forgotten that among the costs, which can be reclaimed, are those relating to rentals. In effect, if the oil companies rent a property, it is taxpayers who will end up paying the rent to rich landlords.
But Jagdeo also seems to have forgotten that Guyana does not have an alien land-ownership law, which would prohibit foreign companies from buying up properties in Guyana. He was Finance Minister when the country had an opportunity, as part of its investment policies and laws, to try to prohibit foreign property ownership.
Over the past five years, foreign companies have entered Guyana’s real estate market. The Trinidadians have been known to be scouting for properties. Foreign-owned medical schools have acquired properties. Under the PPP/C itself, foreign companies were given lands, not told to go and rent from property owners.
Jagdeo cannot pick and choose when it comes to alien property ownership. It is either his government passes a law to prohibit foreign land-ownership or allow the current liberalised system to continue. He has to make up his mind.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)
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