Nov 06, 2022 News
Jagdeo’s new terms for PSA must apply to all future ExxonMobil projects – Patterson
“They (Exxon) have the largest block, 26,000 square kilometres which would literally be at least 13 or 14 times greater than their competitor and which means the probability of more finds in that 26,000 square kilometres is exponentially higher so to give them a free pass for that entire block is according to the Alliance For Change, unacceptable.” – David Patterson
By: Davina Bagot
Kaieteur News – Clenching the keys that have unlocked more than 11 billion barrels of oil already in the Stabroek Block, with four projects already approved by the Government, oil major ExxonMobil should also be subjected to the terms of the new Production Sharing Agreement (PSA) for all other projects it wants to pursue in Guyana’s waters.
This is according to Shadow Oil and Gas Minister, David Patterson, who during an Alliance For Change (AFC) media engagement, on Friday, insisted that a level playing field must be instituted, to allow for free and fair competition in the sector.
Importantly, he pointed to the fact that ExxonMobil holds the licenses to the country’s largest oil block, the Stabroek field, which measures approximately 26,800 square kilometres. The PPP government announced this past week that it will be putting on auction 14 oil blocks in its Exclusive Economic Zone (EEZ). Notably, the size of these blocks is between 1,000 to 3,000 square kilometres.
It is in this regard that the AFC believes the new terms, which seek to secure more benefits to Guyanese, must also extend to the Stabroek Block, which is governed by a separate deal that locals have been protesting for months.
While the Alliance For Change commended the administration for reportedly following in its footsteps by auctioning the oil blocks, Patterson insisted that the government must not allow ExxonMobil to be given a “free-pass”.
The Shadow Natural Resources Minister explained, “I don’t see it’s unreasonable if the government says to Exxon, we will grandfather you in for these four, or, maybe the next one- the four or the five discoveries that you have- we will grandfather you in, in the sense that the old deal can work for the four as a matter of compromise the other 30 discoveries you shall be subject to the new regime and everyone else in the oil industry will be on a level playing field.”
The term ‘grandfathered in’ also known as the ‘grandfather policy’, for those who may not be aware, is a provision in which an old rule continues to apply to some existing situations, while a new rule will apply to all future cases.
As such, Patterson said this principle can be applied to the first four projects that have already been approved, “for their pioneering work that they would have done in first discovering oil on the block,” but to exclude the company from this new fiscal arrangement would simply be unacceptable he added.
The former Minister of Public Infrastructure was keen to note, “They (Exxon) have the largest block, 26,000 square kilometres which would literally be at least 13 or 14 times greater than their competitor, and which means the probability of more finds in that 26,000 square kilometres is exponentially higher, so to give them a free pass for that entire block is according to the Alliance For Change, unacceptable.”
Vice President Bharrat Jagdeo on Thursday, while announcing the auction of 14 of Guyana’s oil blocks, also shared some of the terms that will be included in the fresh deal. He was keen to note that all future blocks will be governed by these new fiscal arrangements, while Exxon, will continue to enjoy the lopsided 2016 deal.
Notably, the new PSA will feature a 10 percent royalty rate (up from the existing two percent); a 10 percent corporation tax and ring-fencing provision. Ring-fencing would allow for the earnings from one project to cover the expenses in that specific development only, which would allow the country to see more annual revenue. In the absence of this key clause, Exxon is allowed to recover expenses from multiple projects from the revenue earned by oil producing project.
The new PSA will also cap the recovery of expenses at 65 percent of earnings annually. Presently, the Stabroek Block operator is allowed to deduct 75 percent of costs from Guyana’s earnings upfront to cover its expenses.
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