‘Get better fiscal terms before approving Exxon’s 7th project’

Dec 10, 2024 News

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—Opposition parties tell govt

Kaieteur News- Three of Guyana’s top opposition parties- PNC, AFC, and WPA are all demanding that the government better secure better fiscal terms from ExxonMobil before it grants the permit for the seventh project- Hammerhead.

ExxonMobil has made an application to the seventh project, but Vice President, Bharrat Jagdeo has said in the past that there is no guarantee approval would be granted. During a press conference in August, Jagdeo when questioned on the seventh project said, “When and if…if and or when and if we approve the project then you will be told about what the benefits will be.” At that time, the former Head-of-State said the company had not yet made an application for the project. Following the official application by the company, Jagdeo was again asked to comment on the project when he announced that government has discontinued an advertisement for a consultant to review the Hammerhead project. According to him, the information the company presented was incomplete.

Hammerhead is located in the south-central portion of the Stabroek Block, approximately 160 km from Georgetown. Current plans include drilling via drill ships to produce oil using approximately 14 to 30 production and injection wells. Production is expected to begin in 2029 subject to the necessary regulatory approvals and operate for at least 20 years.

In the Project Summary submitted by Exxon to the EPA, the company explained that the project is expected to add 120,000 to 180,000 barrels of oil per day production capacity. The Floating Production Storage and Offloading (FPSO) vessel will be capable of storing approximately 1.4 to 2 million barrels of oil. Third-party oil tankers will be scheduled to offload the oil from the FPSO, making the oil available for export to the international market. To date, Exxon has obtained approval from the Government of Guyana for six development projects in the Stabroek Block – Liza Phase One, Liza Phase Two, Payara, Yellowtail, Uaru and Whiptail. The first three projects are already producing oil at a daily estimated rate of 640,000 barrels per day (bpd).

Speaking at his party’s press conference on Monday, Co-Leader of the Working People’s Alliance (WPA) Dr. David Hinds said his party is concerned about government engaging ExxonMobil in a   lopsided arrangement. He said Guyana must leverage its ‘sweet crude’ for any future negotiations. Dr. Hinds told reporters that “we (WPA) think, given what we have, given the volume of oil that we have, given the quality, the sweet oil that we have, we do have some leverage there, and that our government should exercise that leverage. So, WPA is not opposed to renegotiation with Exxon that would bring maximum benefits to our country.”

He explained that WPA is interested in ensuring that any future negotiations between Exxon or any other oil company, and the government are free from the mistakes of the past in terms of the 2016 PSA…”  The Co-Leader of the party made it clear that he is not asking the government to take the members of the opposition to the negotiation table when the negotiations are to be done, but rather there should be consultations with the political oppositions any other major stakeholders before engaging Exxon, highlighting that this is something they feel strongly about. “We think that was one of the weaknesses of the first negotiation. Secondly, we would like some of the issues that were raised about the first negotiation to be ventilated.”

Secure additional benefits

Recently, the Alliance For Change (AFC) said that government needs to secure additional fiscal benefits for its people ahead of the granting of a permit to ExxonMobil Guyana for the 7th oil project – Hammerhead. On Friday, during the party’s weekly press conference, Kaieteur News asked whether the party believes there should be more fiscal benefits ahead of the approval of the permit. Chairman of the party, David Patterson told reporters that Vice President Bharrat Jagdeo, who is also the country’s chief policymaker on oil and gas, should focus his attention on deriving more benefits from the oil company. “Jagdeo and the PPP instead of doing what they should be doing trying to make the country better are taking out the big stick method, threatening that they will withhold permission on (7th project),” Patterson said.

The People’s National Congress Reform (PNCR) is also calling for better fiscal terms before granting of the permit for the seventh project.  Advisor to the party on oil and gas, Elson Low said the party always held the position that it is critical for the government to have discussions with ExxonMobil to derive additional benefits for the people of Guyana. Low was asked by Kaieteur News whether his party believes that more benefits ought to be obtained before the approval of the project. “It doesn’t have to be at the instance of the granting of an additional permit, it could be in the near future. It could be that the government engages with consultants, and with legal representation to have that discussion and prepare itself. Rather, we have not seen any movement on that front,” Low said.

The government, opposition and several other stakeholders both locally and internationally have acknowledged the lopsided nature of the 2016 agreement, which waives all taxes for the oil companies, requiring the government to pay Exxon and its partners’ taxes from Guyana’s share of oil profits. The deal also 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.

(‘Get better fiscal terms before approving Exxon’s 7th project’)

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• Dr. Hinds, Exxon, Government, sweet crude, WPA

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