Norton prepared to up royalty rates and tax ExxonMobil

Nov 16, 2022 News

Kaieteur News – Opposition Leader Aubrey Norton on Tuesday announced his readiness to ensure that Guyanese benefit more from the Stabroek Block, operated by ExxonMobil and its partners by subjecting all future projects within the Block to new terms.

Norton was at the time responding to a question posed by Kaieteur News at his weekly press conference. Recently, the Opposition Leader had said that the new fiscal terms announced by Vice President Bharrat Jagdeo for the oil Blocks to be auctioned should also be extended to future projects in the Stabroek Block.

Opposition Leader, Aubrey Norton addressing reporters during his weekly press conference yesterday

“We have not seen all that they have put out, [it is] mainly introductory. We want to see the entire agreement and then we will be in a better position to comment but for now, we believe that the resources from oil must benefit our people and as a government in waiting, we are committed to ensuring we get as much as possible out of the agreement while at the same time ensuring that the investors get a reasonable return on their investment,” he said.

President Irfaan Ali had told reporters on Friday that the Opposition is taking an opportunistic position while blaming the former Coalition Government for the “lopsided deal”.

Norton in response said, “I don’t know that there is anything opportunistic about our approach. First, we said when the first agreement was done the environment was a totally different environment, now we know we have more barrels of oil. Now we know a number of things that we didn’t know then and therefore going forward, we are committed to ensuring that the people of Guyana benefit.”

Norton assured that there will be scrutiny of the existing contract. “All I am saying, we will look at that contract and once we are satisfied that those are the conditions that are there, we are prepared to do it but we are not going to commit until we see the entire contract, know where the weaknesses lie, know where the strengths are so we can comment on them and then make a firm commitment on what we do in government.”

Norton said it was critical to see the new Production Sharing Agreement (PSA) because the terms in the document could be different from that announced by the Vice President.

Stakeholders have been calling on the Administration to renegotiate its contract with ExxonMobil since the Stabroek Block’s PSA was signed at a time when only 1.1 billion barrels of oil was discovered. Six years later, over 10 billion more barrels have been discovered in the country’s Exclusive Economic Zone (EEZ).

Further, the oil company has been making massive profits off the country’s wealth, while Guyana, for example refuses to impose taxes and hike the royalty rates from two percent.

Both the People’s National Congress Reform (PNC/R) and the Alliance For Change (AFC) have said that the terms of the new PSA announced by Vice President Bharrat Jagdeo for the 14 oil blocks that are to be auctioned, must apply to the Stabroek Block to level the playing field.

Jagdeo said the new fiscal terms will include a 10 percent royalty, 10 percent corporation tax and a ring-fencing provision. He explained that the 14 oil blocks vary in size but range from approximately 1000 square kilometres to 3000 square kilometres, with the majority of them being close to 2000 square kilometres.

Meanwhile, the Stabroek Block which covers approximately 26,800 square kilometres and is operated by ExxonMobil and its partners – Hess and CNOOC – remains bound to a separate arrangement in which it only pays two percent royalty, no taxes and also recovers expenses from multiple projects from the revenue earned by development, in the absence of ring-fencing provisions.

Further, Exxon is allowed to deduct 75 percent of costs from Guyana’s earnings upfront to cover its expenses while the new PSA would cap cost recovery at 65 percent of earnings annually.

While Government maintains that the ‘sanctity of contract’ is the reason for not renegotiating the agreement, it must be noted that the deal was modified in the past to make it pellucid that royalty would not be recovered by the operator.

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