Nov 07, 2022 News
“You may just look at the number, 10 percent, and people might shout that they have done a good job… (but) you could be charging them 10 percent and you be giving away 50, 60, 70 percent with loose regulations and policies, so don’t be caught up with the number.”- Patterson
Kaieteur News – The Alliance For Change (AFC) has not given the new Production Sharing Agreement (PSA) a passing grade just yet, based on the preliminary provisions announced by Vice President Bharrat Jagdeo last Thursday.
In fact, the political party believes that the entire deal must be scrutinized in-depth, before Guyanese laud the contract a ‘better deal’ compared to the 2016 ExxonMobil contract.
Putting this into perspective was Shadow Oil and Gas Minister, David Patterson, during the party’s most recent Press Conference. Patterson was keen to point out that while 10 percent royalty for instance may sound exciting for the country, Guyana could be losing out big in other areas.
In an invited comment on Friday, the Member of Parliament (MP) explained, “It is a step in the right direction but as I said before the devil is in the details. You have to look at everything holistically. Somebody may shout 10 percent is a good number but then when you do actually award the PSA there is no clause in there for unlimited liability insurance, there is no clause for studies, for waste water management and those things like that.”
Patterson has been the Coalition’s key spokesperson on natural resources issues in Parliament, and has been arguing the need for those provisions to be included, to guide the ongoing production of oil by ExxonMobil in the Stabroek Block.
He reasoned, “You may just look at the number, 10 percent, and people might shout that they have done a good job… (but) you could be charging them 10 percent, and you be giving away 50, 60, 70 percent with loose regulations and policies, so don’t be caught up with the number.”
The former Minister believes that a proper PSA should specifically address full liability coverage in the event of an oil spill, and a clear no-flaring policy or a hefty fine around $3 million per tonne or carbon dioxide emissions, to deter operators from this dangerous activity offshore. Additionally, the new deal should also insist that there is no dumping of waste into the country’s waters, as well as outline specific local content targets to ensure more money “stays locally”.
To this end, he concluded, “We have to look at it in the entire package and if all other conditions- I’m talking about flaring, no dumping, unlimited (liability) coverage etcetera and ring-fencing- if all of those are satisfied then we could look and say oh, we give the 10 percent a passing grade but right now it’s just a number plucked out of the air”.
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.
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 among others. 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.
Jagdeo was keen to point out that all future blocks will be governed by these new fiscal arrangements, while Exxon, will continue to enjoy the lopsided 2016 deal.
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