Latest update May 28th, 2023 12:59 AM
Mar 24, 2023 News
– says their posture signals importance of sanctity of contracts
Kaieteur News – United States of America’s (USA) Ambassador to Guyana, Sarah Ann-Lynch recently told a visiting U.S. Congressional delegation that Guyana continues to hold to agreements made with U.S. oil giant, ExxonMobil.
At a reception held in honour of the visiting delegation, Ambassador Lynch said, “since first oil, Guyana’s political leaders have honoured contractual commitments and continue to do so.” This posture, she posited, “signals the importance of the sanctity of contracts,” on the part of the Guyana Government. Ambassador Lynch used the occasion to allude to strides taken to make Guyana attractive to investors. “They have been excellent partners in energy, agri-business, and security; they are taking bold leaps to transform the financial, education, health, and tourism sector.”
Addressing the visiting delegation directly, she said as you have seen, “in even your short time here, there are major infrastructure projects underway across the country, and the progress is constant.” To this end, she said government clearly wants to leverage the opportunities they are (already) receiving, and the United States stands ready to assist.
The opportunities referenced by the Ambassador however, are being questioned vociferously by sections of civil society that have led to a growing outcry for the provisions in that PSA (contract) to be renegotiated altogether.
The incumbent administration, has since expressed publicly that the PSA/Contract was inherited, and while they do not fully agree with all of the provisions, they would have to respect the ‘sanctity of contract,’ since to do otherwise, could shut down the industry and drive away investors—in country and potential.
It would be apposite to note, that from the onset of the criticisms of the provisions in the PSA, the US Ambassador had acknowledged the right to renegotiation by the Guyana Government. Back in April 2019, the Ambassador had contended that it is within Guyana’s sovereign right to renegotiate the controversial PSA between the country and ExxonMobil Guyana and its partners “if it so chooses.” She was further quoted as saying, “…we certainly believe that Guyana is a sovereign country, so that [renegotiating] would be for Guyana to work that out with the private sector to see if there is room for renegotiation. We certainly won’t interfere with that.”
It is also important to note, that the PSA itself does provide room for renegotiations.
In that document, its states, “…This Agreement shall not be amended or modified in any respect, except by written agreement entered to by all parties…” As such, the clause inherently accepts that by agreement between the parties, the contract can be changed.
The parties referenced in that 2016 PSA includes Esso Exploration and Guyana Limited (EEPGL)—ExxonMobil Guyana—Hess Guyana Exploration Limited, China National Offshore Oil Company (CNOOC) and the Guyana Government, through its former substantive Minister for the sector, Raphael Trotman. ExxonMobil Guyana with a 45 percent interest in the Stabroek Block, for which the PSA was inked, is the Operator.
Hess holds a 30 percent stake while CNOOC controls the remaining 25 percent interest in the Stabroek Block. Under the PSA inked, Guyana receives a two percent royalty on oil produced and sold, while expenses are capped at 75 percent of the gross monthly production from the producing oil fields. The remainder of earnings for that month is then split as profits, 50/50 with all arrears rolling over to the following months.
These, among numerous other provisions and, or omissions in the PSA, have fueled a contentious nationwide brouhaha that even attracted input from international experts, weighing the pros and cons of that contract. Vice President, Bharrat Jagdeo, who according to the Ministry of Natural Resources, plays a leading role in the judicious management of Guyana’s oil and gas sector, has since taking power in August 2020, repeatedly dismissed the notion of renegotiations of that Stabroek Block PSA, opting instead, to revise the terms had in the new Draft Contracts, since released to the public.
While in opposition Vice President Jagdeo had publicly stated that with each oil find/discovery in the Stabroek Block, Guyanese should be sad, since with the provisions of the PSA, “nothing comes our way.” Citing examples leading to his dissatisfaction at the time, he referenced the lack of a ring-fencing arrangement and the tax waivers among others that had led his party to condemn the PSA as lop-sided and had promised to renegotiate it.
Head-of-State, President Irfaan Ali, prior to assuming office had also lambasted the PSA and its provisions saying Guyana had been left “holding the wrong end of the stick” with that contract. He too has since changed his public posture on the need to renegotiate the PSA. Addressing the matter of renegotiating the ExxonMobil contract for the Stabroek Block, Ambassador Lynch in 2019 had said the decision is one that would have to be taken by the government of this country and the US would in no way intervene.
This since, the Embassy’s role was not to be part of any negotiation but to ensure that its businesses are treated fairly. “Our main role in looking at this tremendous opportunity in the oil and gas industry…is that businesses are treated fairly. There is ample opportunity for growth and interaction with the government and mostly that there is a level playing field. That would be our focus.”
No contracts cast in stone, except Norton and Jagdeo own!
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