Kaieteur News – With the discovery of new oil wells in the Stabroek Block, the US$18M signing bonus now increasingly looks like a breadcrumb. Guyana accepted this pittance when it signed the Production Sharing Agreement (PSA) with the oil companies in October 2016.
The APNU+AFC opted to keep the signing bonus secret. One person even went as far as saying that he thought it was a gift to the country.
That is the most absurd explanation you can find because the agreement itself makes no illusions about the signing bonus. The PSA clearly states that the sum was a signing bonus and was to be paid into a Bank of Guyana bank account.
At the time of the signing of the PSA, there were only five discoveries: Liza, Payara, Snoek, Liza Deep and Turbot. Since then another 15 discoveries have been made which have increased Guyana’s oil reserves to almost 10 billion barrels.
This fact alone ought to have been sufficient cause for the Guyana governments – both the APNU+AFC and now the PPP/C – to demand an increase in the signing bonus. At the time of the signing of the contract, one economist said that instead of US$18M, Guyana should have received US$238M.
With these new discoveries, Guyana should be receiving another US$1 B. However, no attempt was ever made and is ever likely to be made to demand an increase in the signing bonus.
And the Guyanese people seem unperturbed. Instead of the signing bonus of US$1B and each school child being eligible to receive a one-off G$2M cash grant, people are getting excited with G$19,000.
It shows the power of political loyalty and competition. One side is reluctant to come out and criticise the signers of the agreement for short-changing the nation. And the other side does not wish to be critical of the present government, which is refusing to renegotiate the contract.
But how can the government settle for a signing bonus of US$18M when since then 15 other discoveries have been made: Ranger, Pacora, Longtail, Hammerhead, Pluma, Tilipia, Haimara, Yellowtail, Tripletail, Mako, Uaru, Yellowtail 2, Redtail and now Whiptail.
Ironically, while the oil companies are naming their discoveries after local fishes, the fishermen are complaining that since drilling and seismic studies commenced, their catches have declined by as much as 40 percent. And while the oil companies are giving their discoveries names such as Yellowtail, Longtail, Tripletail, Redtail and Whiptail, it is the Guyanese who are ‘ketching their tails.’ This is another way of saying, ‘Guyanese are experiencing hardships.’
As this newspaper reported in 2017, at the same time that Exxon handed Guyana a US$18M signing bonus, it also paid US$1.19B for blocks in Brazil, according to a Reuters Report.
In December of 2019, TOTAL paid Suriname a US$100M signing bonus for a 50 percent stake in an oil block. This was reported in the local media.
But what really shows how the oil companies short-changed Guyana was that a Canadian company paid CGX a US$33M signing bonus for a 33 percent interest in two oil blocks. But hear this… no oil has yet been discovered in those blocks.
Yet, Guyana had five discoveries at the time it signed its PSA with Exxon, but settled for a pittance of US$18M. Since then the country’s reserves have been estimated to have been increased by more than six times but no additional payment is forthcoming.
But apart from not making any attempt to renegotiate the signing bonus with Exxon, Hess and CNOOC, the governments of Guyana have also failed to demand signing bonuses from Ratio Energy Limited, CGX Energy Inc., Eco-Atlantic and Tullow Oil with whom there are also agreements.
But to add insult to injury, Guyana also settled for a two percent royalty. One oil expert described this as the lowest he has ever seen.
The oil companies got what they wanted. They paid a pittance as a signing bonus. Mind you, the people of Guyana may not see a cent of this money because it will end up, most likely, paying legal fees for Guyana’s case before the International Court of Justice.
The oil companies are also offering a pittance in royalties and a 50 percent on profit oil. The oil companies have a stabilisation clause, which protects them from any changes in the country’s laws. It makes them virtually exempted from changes to laws, which would adversely affect them.
Then there is a Force Majeure, which protects them from unpredictable events. The contract is so lopsided that it can be challenged on this ground before the International Court of Arbitration (ICA).
But we know that Guyana will not seek to have the ICA nullify the PSA. And this means that Guyanese can kiss the oil dream goodbye!
(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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