Ramjattan challenges Govt. to renegotiate oil contracts

Jan 01, 2022 News

Kaieteur News – During the second sitting of the National Assembly on Wednesday, Opposition Member of Parliament, Khemraj Ramjattan challenged the PPP administration to renegotiate the oil contracts.

Opposition Member of Parliament, Khemraj Ramjattan

Ramjattan made the charge during the debates on the Local Content Legislation.
He said, “It is fortunate because of signing the production agreement that we are seeing all of this happening here. When the oil was found and (a) production agreement had to be made (there was) one set of gallivanting and pompeziting from the Opposition how they gonna renegotiate and all of that and they had a model under which we adopted and even got one percent more royalty.”
In this regard, the MP urged, “They could say whatever they want. Well renegotiate it. You (are) talking about sanctity of contract now? Renegotiate it!”
Meanwhile, Minister of Natural Resources, Vickram Bharrat on Wednesday told the National Assembly that Guyana has one of the worst oil deals.
According to Bharrat, “I’m not sure what the honourable member, Mr. Ramjattan, was trying to say when they negotiated for an extra percent of royalty. Mr. Speaker, we have probably one of the worst production sharing agreement in the world and the honourable member is here boasting about negotiating for one extra percent, when countries are enjoying five and seven percent.”
It must be noted that even though the Minister has accepted the fact that Guyana is merely benefitting from two percent of the country’s oil wealth, the Government has not since made efforts to renegotiate the contract, despite having promised so on the elections campaign trail.
While serving as the People’s Progressive Party (PPP) General Secretary, Bharrat Jagdeo had said that he wanted the unfavourable oil contracts renegotiated, but consistently refused to renegotiate the one contract that at this juncture promises to make Guyana some much needed money. That contract is the Production Sharing Agreement (PSA) that governs operations on the Stabroek Block.
Jagdeo pointed to the PPP as a group that would manage the oil sector well if it is elected to Government on March 2, 2020. He had said that it would look to revisit lopsided oil contracts – all except for the Stabroek PSA with ExxonMobil and its partners, that is.

Natural Resources Minister, Vickram Bharrat

He had, for instance, noted the Orinduik PSA as a contract that he is interested in revisiting when it was pointed out that Guyana will effectively be getting no royalty for operations done on that block. Tullow Oil and its partners had boasted that the contract allows them to pay the meagre one percent royalty with one hand, and take it back with another.
For the Orinduik Block, on the other hand, two discoveries have been made, but Tullow has announced that the “heavy oil” found there is causing the contractors to reassess just how commercially viable production would be for them.

So, despite the fact that other contracts may be lopsided too, the Stabroek PSA is the one that has caught flack since its release to the public. The Stabroek PSA, which governs operations for 14 significant discoveries there, has been criticised for its extremely low royalty at industry standards, its daunting lack of ring-fencing provisions, its gaping loopholes which could lose Guyana billions of US dollars in revenue, and many more issues. Some of the provisions in the Stabroek PSA have even been determined to be illegal by some, and will be facing a judicial review at the behest of Activist, Ramon Gaskin.
Despite all of that, Jagdeo has singled out the Stabroek PSA as the one contract which his government will not touch, as he has said that Guyana could still claw back value with it as is.