Creating new PSA and not fixing Exxon’s lopsided contract, takes Guyana nowhere – Glenn Lall

Sep 19, 2024 News

Kaieteur News – Kaieteur News Publisher and businessman, Glenn Lall said that the government creating a new Production Sharing Agreement (PSA) with better provisions without addressing the flaws in the existing 2026 Exxon PSA still leaves Guyana with the short end of the stick.

Kaieteur News Publisher and businessman, Glenn Lall

Lall’s comment follows reports that while Guyana earned $336 billion from oil sales last year, it had to pay around $306 billion in taxes on behalf of Exxon and its partners, Hess and CNOOC, due to the terms of the deal signed with the U.S. oil giant by the David Granger-led Coalition Government.

During his radio programme on Monday night, Lall said, “You find words to describe that insanity because I can’t. Let’s pause on that a second, collect $336 billion and almost all of that had to pay the taxes for Exxon and partners, what are we running here man.”

At his last press conference, Vice President (VP) Bharrat Jagdeo, the country’s chief oil and gas policy maker, was asked if he could change anything in Exxon’s PSA without affecting the investment climate or contract sanctity, would impose taxes on Exxon and its partners, Hess and CNOOC. In response, Jagdeo acknowledged that while in opposition, the People’s Progressive Party/Civic (PPP/C) identified several flaws in the deal. He explained that the 2016 agreement waives all taxes for the oil companies, requiring the government to pay Exxon and its partners’ taxes from Guyana’s share of oil profits. He also highlighted that the deal grants Guyana only a 2% royalty on its resources and allows the companies to recover 75% of their investments before splitting the remaining 25%, with Guyana receiving just 12.5%.

Furthermore, the contract also lacks a ring-fencing provision. This means Guyana is covering the costs of projects that have not yet started production. Each month, future development expenses are added to Exxon’s cost-recovery list. This deal has faced criticism both locally and internationally.

Vice President (VP) Bharrat Jagdeo

Further, the Vice President went on to discuss the fiscal terms in the new PSA, boasting of improvements such as a 10% royalty, a 10% tax, and a 65% cost recovery limit. However, Lall criticised Jagdeo’s response, noting that instead of directly answering the question about if he would charge taxes to Exxon and its partners, Jagdeo deflected by highlighting the flaws in the original contract—a tactic Lall described as his usual strategy. “That’s a simple question, that only required a yes or a no…”

Lall highlighted that the Irfaan Ali-led administration created a new PSA indeed with better provisions but the new PSA does not apply to the Stabroek Block which is operated by Exxon. In fact, he said the government has left the Exxon contract untouched. “He changed course there, —telling the reporter about the new PSA, meaning the new contract for the small oil blocks… He made sure to tell us, how he fixed all the clauses for those oil blocks, but when it comes to the Stabroek Block, which holds almost 90% of all the oil—the one to make us all rich—he isn’t touching that upside-down deal,” the businessman stated.

It was reported that while in opposition, the PPP/C had pledged to renegotiate the oil deal. However, the party since assuming office in August 2020, consistently denied ever making such a promise regarding the renegotiation of the Exxon contract. “No, he (Jagdeo) is not touching or changing anything in that huge Stabroek Block to upset Exxon, this has been his trick from day one, since he took control of the oil sector,” Lall argued.

Lall continued, “every time he opens his mouth to talk about oil, he boasts about his 10% royalty, 10% tax, 65% cost recovery and full compensation from an oil spill – but all of that only apply to the new oil blocks… He addressed all the wrongs in the PNC contract with Exxon, for the new oil contract he came up with for the new oil blocks, and made it clear he is not touching the Stabroek Block agreement with Exxon.”

Moreover, Lall stressed that Guyana is sitting on one of the richest oil fields in the world, yet instead of receiving “a fair piece of the pie”, most of its people are struggling to make ends meet. He noted that since oil production began five years ago, from December 2019 to the present, the country has been collecting only a small amount of the earnings from its resources – as a result of the 2016 oil deal – and from that the country has to pay taxes on behalf of the oil companies. What is even more troubling, according to Lall, is that the authorities in charge continue to approve more oil projects without making any changes to address this “tax sickness.”

• Bharrat Jagdeo, Glenn Lall, Guyana, Kaieteur News Publisher and businessman, Vice President (VP)