Aug 07, 2022 News
Kaieteur News – Vice President Bharrat Jagdeo, who has been calling the shots in the oil and gas sector, has accepted that the lopsided oil contract signed with oil major, ExxonMobil, will have to be renegotiated in the future, as the deal is far from the picture being painted by “independent experts” such as Rystad Energy and the oil giant itself.
He made these remarks on Saturday while addressing hundreds of residents at an outreach hosted at Patentia, West Bank Demerara (WBD).
According to the VP, “on the one hand, you see Rystad Energy and Exxon trying to prove that they are the best thing for Guyana, which is not so. The contract was bad, we have to change it in the future but we are not going to renegotiate now.”
Rystad Energy, a Norwegian based “independent group” has since admitted, through its Senior Vice President and Head of Latin America and the Caribbean, Schreiner Parker, that ExxonMobil is among its clients. Parker this past week was here in Guyana to unveil a report on Guyana’s upstream sector, where among other things it said that Guyana is poised to receive at a flat rate of US$50 per barrel, US$157B into 2040. Parker, did not, however, consider what Guyana’s revenue would look like in the face of environmental and other technical risks.
Nonetheless, Jagdeo pointed out that when he notices the “extremism” in the daily newspapers “swinging from one end to the other in terms of policy making, it is obvious that the administration simply cannot succumb to such strategies, especially since the “big goal is long term development, however hard it is.”
He went on to explain that while Kaieteur News and “a few others” believe that the contract is the worst in the world, this too is simply not true. Jagdeo did not bother to tell the gathering which other contract exists that only benefits oil companies, rather than countries, but noted that his administration stands in the middle where the deal is concerned.
“We stand in the middle and we are not going to be populists in orientation because government’s side that are populists in orientation and say things that people only want to hear, they can never craft a sustainable policy for the country,” the former Head of State noted, before switching gears to discuss part-time job opportunities for the people on the WBD.
In the PPP’s 2020 manifesto it had promised to renegotiate the deal entered into by the former Coalition administration back in 2016. However, shortly after taking office, the government changed its tune, insisting the contract could not be touched to maintain “sanctity” of agreements.
The government has been arguing that if it 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 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.”
It must be noted, however, that this clause was in existence before the PPP took office. This means that while it was in Opposition, the PPP was well aware of this provision when it made the promise to renegotiate the contract.
Provisions in the 2016 PSA
While both the PPP and former Coalition government 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 forces Guyanese to pay their share of taxes, amounting to millions of US dollars each year. This figure is likely to further balloon 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.
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