Sep 15, 2022 News
– But maintains criticisms of low royalty, tax giveaway, no ring-fencing provision
Kaieteur News – Vice President, Bharrat Jagdeo has maintained that the mere 2 percent royalty, massive tax breaks, and the absence of a ring-fencing provision, are three key flaws of the 2016 Stabroek Block Production Sharing Agreement (PSA), but said his government will not seek to renegotiate the deal to correct those identified weaknesses.
The Vice President made the foregoing position known during an appearance on The Glenn Lall Show which was broadcast by Kaieteur Radio on Tuesday evening. During his almost three-hour long interview with Kaieteur News Publisher, Glenn Lall, Jagdeo was asked a series of questions about the deal that was signed with ExxonMobil Corporation affiliate, Esso Exploration and Production Guyana Limited (EEPGL) and its partners, Hess Corporation and CNOOC Petroleum Limited. Lall’s first question sought to ascertain if Jagdeo maintained his criticisms of the contract, which were first divulged during his time in opposition.
Jagdeo said, “I do, I do and I will tell you now why I maintain the position that the contract is lopsided. We identified several areas; one was the total take for the Guyanese public. We believe that when the contract was renegotiated by (former Natural Resources Minister, Raphael) Trotman that we already had three billion barrels of proven resources in the ground and that opportunity should have been used not to weaken the 1999 contract but to add benefits to it.”
The VP said the 2016 contract was drafted by Exxon and sent to the former APNU+AFC government. Jagdeo said he does not know what internal process it went through but it was signed by Trotman almost overnight and contrary to advice. The official reiterated that while the contract is lopsided, his government will not renegotiate it as previously stated while in opposition. “We will ensure that we have better contract administration. If we fail to have better contract administration and there was no room for that then we’ll take a harder line,” the VP added.
KN’s Publisher then asked the VP to explain to citizens what differently he would have done from the Coalition during negotiations in 2016 with Exxon. Jagdeo was keen to note that issues of taxation in the contract would have been better addressed as it is an area of contention now with Exxon and the Guyana Revenue Authority (GRA). “We have issues with taxation and even now, we have a dispute with Exxon about vehicles. They wanted to bring in 20 SUVs and we said that’s not covered by the agreement; you have to pay taxes on those, that it’s not a blanket concession,” the Vice President noted. He was keen to note that the PPP/C Administration would have also addressed the size of the royalty as well as the absence of ring-fencing provisions which would have prevented ExxonMobil from deducting expenses related to other projects from the revenues of oil producing projects.
Challenged to say what rate of royalty he believes would have been fair to the Guyanese people, the VP said he could not give a direct figure for several reasons. He said that he first of all did not want to be premature and undermine discussions that are underway for the new royalty that would be part of the Model PSA which would be used in the country’s upcoming oil blocks auction. He noted too that there are three variables that will inform the new fiscal design going forward. Jagdeo said the government will consider the company’s legitimate expectation that if they invest money, they should get a decent return on their investment. Jagdeo said government will also consider having enough incentives in the new PSA to accelerate exploration and production and also a greater share of the benefits for the State.
Additionally, Jagdeo shared that government is looking at a royalty spectrum used by nations like Norway. Once the foregoing variables have been carefully considered, the Vice President said a combination of adjustments can be made on royalty, profit sharing and the taxes to be paid by the companies so that the State’s take is higher. Returning to the crux of the Publisher’s question, Jagdeo said he would avoid giving a figure such as five percent royalty as it would, in his view, preempt the collective discussion that the Cabinet would have on the matter.
Asked to say if he believes the coalition government erred in signing onto provisions that leave Guyana paying the income taxes for the country along with waivers on duties for imports, the VP answered in the affirmative. The former President said he does not agree with the arrangement for massive tax giveaways.
In conclusion, he said the PPP/C Administration would have used a combination of fiscal terms that would have resulted in a greater take for the country.
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