Aug 02, 2022 News
Two years in office…
Kaieteur News – After two years in office, the People’s Progressive Party (PPP) has not only refused to keep its manifesto promise to renegotiate the 2016 oil contract, but has now taken on the role of defending the deal and its partner, American oil major, ExxonMobil.
Leading up to the 2020 Elections, the party while in Opposition, excited the Guyanese people with its plans to bring back the oil company to the table. The citizens still remain desperate for changes to the deal that the former A Partnership for National Unity + Alliance For Change (APNU+AFC) Coalition had entered into with the oil company.
Soon after taking office, the ministers along with the Head of State, Irfaan Ali have turned their faces to another direction, insisting that the deal simply cannot be changed, to maintain the sanctity of contracts.
The government has been arguing that if goes down the lane of approaching the oil company for a renegotiation, it could send the wrong signal to other potential investors- that the country would not stick to contractual agreements it made. In addition, the government’s side often reference the Stability Clause included in the oil deal. Article 32 of the contract, which lists out conditions for ‘Stability of the Agreement’ states at 32.1 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 Contractor.”
Civil society activists have voiced their concerns on numerous occasions regarding the contract and its “unfair” provisions to the Guyanese citizens- the true owners of the oil and gas resources. Notably, Article 32 of the deal was in existence before the PPP took office. This means that then Opposition was well aware of this provision when it made the promise to renegotiate the contract.
Nonetheless, printed on page three of the party’s eight-paged 2020 Manifesto is a promise of “Securing the Benefits of Oil and Gas for All Guyanese”. As part of its plans, the party noted, “To ensure that our oil resource is managed responsibly, the PPP/C will: immediately engage the oil and gas companies in better contract administration/ re-negotiation.”
Its other plans for the oil sector included establishing a Sovereign Wealth Fund “insulated from political interference,” adding laws to govern how the oil money would be spent and ensure expenditure are transparently determined through the Parliamentary process. The party said it would also establish a regulatory framework, independent of politicians; build capacity to hold oil companies accountable and verify production and expenses; ensure oil blocks are competitively tendered or auctioned; establish a new model Production Sharing Agreement (PSA) and train Guyanese to manage the sector.
In addition, the incumbent administration listed five ways in which it would prevent the oil money from being squandered. Among the plans were to uphold the Santiago Principles of transparency and accountability and adhere to Extractive Industries Transparency Initiative (EITI) standards- both of which promote transparency, good governance, accountability and prudent investment practices. The PPP also noted, “Civil society will be involved in a central role to monitor compliance and accountability.
To this end however, a surprising move was made to remove a 22-member Public Accountability and Oversight Committee that was put in place by the APNU+AFC government to manage the oil money. Vice President, Bharrat Jagdeo who has been controlling the oil and gas sector said this was necessary to facilitate smoother access to the funds, as this body was encumbering the process.
That committee comprised of a representative from civil society organizations and community based organizations, a nominee to represent women with the nominee being nominated by civil society organizations; a nominee of the Bar Association of Guyana; a representative of the Guyana Consumer’s Association; a nominee of the Guyana Extractive Industries Transparency Initiative (EITI), a nominee of Transparency International Guyana Inc. (TIGI); a nominee of the Guyana Press Association; a nominee of most representative associations of trade unions; a nominee of the Private Sector Commission, one from each of the 10 Regional Democratic Councils and a nominee from academia who is nominated by the governing council of the University of Guyana.
This committee was replaced by a nine-man team- approved by the President. According to the Natural Resource Fund Act, passed in 2021, “There shall be a Committee to be known as the Public Accountability and Oversight Committee which shall comprise the following members appointed by the President and one of whom shall be appointed Chairperson by the President- (a) a nominee of the National Assembly; (b) three representatives of the religious community; (c) two representatives of the private sector; (d) two representatives of organized labour; and (e) one representative of the professions.”
Provisions in the 2016 PSA
While the two major political parties in the country are determined to stick to the lopsided 2016 oil contract, citizens in Guyana have mounted daily protest action, highlighting the need for changes to be made so that they can secure benefits from the deal. They believe that the present agreement only favours the oil company, as Guyana receives a mere two percent royalty for its sweet light crude and settled for 50 percent profit sharing, after Exxon takes 75 percent of the earnings to clear its expenses.
The deal that the oil company often brags about to its shareholders, also force Guyanese into paying their share of taxes, amounting to millions of US currency each year. This figure is likely to further balloon too as more operations come on stream.
In addition, the country is allowing ExxonMobil to operate offshore without full liability coverage in the event of an oil spill, which means that the risk is borne by Guyana. Another key provision that is lacking in the document is ring-fencing provision, which would avoid the oil company from using the petroleum revenue in one field to cover for expenses in another.
Defending the Exxon contract
While the citizens continue to be burdened by the 2016 agreement, the PPP government has taken on the responsibility of defending the same deal they have publicly agreed is lopsided, and may even be considered one of the worst on Earth.
The recent heroic attitude of the administration was displayed in Parliament on July 21, as Ministers of the government stood against a Motion seeking full liability coverage for oil spill disasters. They argued that seeking such coverage would go against the PSA and would be unjust to the oil company. In another instance, the government has teamed up with Exxon in fighting a citizen of the country in a Court case that challenges the payment of taxes by the administration on behalf of the oil company. That case was filed by Kaieteur News Publisher, Mr. Glenn Lall.
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