Guyana must ring-fence Stabroek Block projects before 2027 – Chris Ram

Sep 29, 2024 News

---

Kaieteur News – The relentless calls for government to ring-fence the projects in the Stabroek Block have so far fallen on deaf ears but if Guyana is to implement such a provision, it has to be done before 2027.

This was recently highlighted by Chartered Accountant and Attorney-at-Law, Christopher Ram during an episode of ‘Oil Talk’ hosted by the Oil and Gas Governance Network (OGGN) on Kaieteur Radio (99.1/ 99.5 FM).

The implementation of a ring-fencing provision would mandate each oil project pay for itself. After the costs are repaid to the Stabroek Block partners, profits to Guyana would significantly increase. The government of Guyana has refused to ring-fence the projects, insisting that this could affect investments by the Co-Venturers, ExxonMobil, Hess and CNOOC. As such, Exxon is allowed to take revenues, which should come to Guyana, to invest in other projects and even finance the company’s exploration campaign.

To date, government has approved six projects without this key provision. Ram however cautioned that the implementation of ring-fencing should be done prior to 2027.

He explained, “In another couple (of) years even ring-fencing will become an academic thing because in 2027, all exploration activities under the 2016 Petroleum Agreement will cease, so ring-fencing doesn’t count.”

Ram in a subsequent interview told this newspaper that unless there is a wave of a magical wand; Exxon will cease exploration activity in the Stabroek Block by 2027, since its exploration license would expire. The areas that do not include discoveries would then be returned to Guyana.

He pointed out, “If you read the very beginning of the contract, they (government) issued them with an exploration license which last for a first period of four years then they can say well we want another three years- that’s seven years now. After the three years, you must give up 20% and then at the end of the 10^th year your exploration license expires and you give up the rest.”

He argued that the developer should not be allowed to charge costs associated with a Floating Production Storage and Offloading (FPSO) vessel of one project to another.

The Lawyer pointed out that the People’s National Congress Reform (PNC/R) is apparently unaware of this since the party in its 20-point plan for the oil and gas sector revealed plans to ring-fence oil projects, if it is elected.

The plan referenced by the lawyer was announced by the Leader of the Opposition, Aubrey Norton, on Wednesday during a press conference.

Ram said, “Apparently, the PNC doesn’t know that, and this 20-point plan that they talk about with ring-fencing. They have just woken up. That’s all I can say about them.”

The Opposition’s 10^th point states, “Considering the vastly changed conditions since the signing of the 2016 Stabroek Block Production Sharing Agreement (PSA) and consistent with Article 32.1 of the PSA, we will complete a top-to-bottom review of the PSA and then engage the Stabroek Block Partners, to maximize the benefits of the oil resources to the people of Guyana while ensuring a fair share of profit for Stabroek Block Partners. The review will include, but not be limited to ring-fencing of projects, oil tax regime, environmental responsibilities, decommissioning, transparency, the timely reporting of information, regulatory oversight and real-time monitoring, auditing, local content, shared management and decision-making in operations in the oil and gas sector.”

Guyana has been urged on multiple occasions by independent experts to ring-fence the Stabroek Block projects but the government remains reluctant, arguing that the country would receive a greater share of profits in the future.

Kaieteur News previously reported that in three separate reports dated 2017, 2018 and 2019, the International Monetary Fund (IMF) urged Guyana to ring-fence its oil fence its projects. In one of the reports, the IMF stated: “This asymmetrical treatment of profit and cost oil will benefit the contractor at the expense of delaying government revenue.”

Meanwhile, the United Nations Development Programme (UNDP), along with another international expert, Chatham House and the World Bank called on Guyana to include a ring-fencing provision for each project.

Director of Financial Analysis for the Institute for Energy Economics and Financial Analysis (IEEFA), Tom Sanzillo painted a more graphic picture in one his reports on Guyana.

He said, “The lack of contract protections means that every time Guyana announces it has received more revenue, it is actually being shortchanged…the country may never see the promised annual revenues in the billions of dollars.”

 

 

---

• Co-Venturers, Exploration, ExxonMobil, Hess and CNOOC, PNC/R, Ram, ring-fence

---