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Guyana cannot seize and sell its own assets to pay for an oil spill- Dr. Adams
Kaieteur News- The assets being paid for by Guyana through the cost recovery mechanism outlined in the 2016 Petroleum Agreement with ExxonMobil cannot be sold by the company to handle expenses related to an oil spill in the Stabroek Block.
This was recently explained by former Executive Director of the Environmental Protection Agency (EPA), Dr. Vincent Adams, during an Alliance For Change (AFC) press conference.
In opening remarks, Dr. Adams, an Environmental and Petroleum Engineer argued that the assets are part owned by Guyana, since the country is repaying the investments.
Former EPA Head, Dr. Vincent Adams
His comments came on the heels of an explanation provided by Vice President, Bharrat Jagdeo that Exxon can sell the Floating Production Storage and Offloading vessels (FPSOs) to handle costs related to an oil spill.
To this end, Dr. Adams said, “What he used to be saying is that we can seize assets to pay for an oil spill. We explained to him you cannot seize your own assets because those are being paid for through cost oil, so we thought that had gone away and apparently he had brought it up again sometime and the reporter ask him it doesn’t make any sense that you are gonna sell your own assets.”
He noted that the AFC as well as the People’s National Congress Reform (PNC/R) had advocated for an unlimited parent company guarantee to dissolve the “foolish, nonsense” that is being purported by the Vice President that the country would sell its own assets to respond to such an event.
Dr. Adams argued, “He need to go read the (oil) contract. They have got to turn over all of those assets to us, free of charge and now he talking well we would freeze the assets and sell it. It’s the stupidest thing I have ever heard.”
The former EPA boss further noted that ExxonMobil had agreed to an unlimited parent company guarantee however this provision was reversed by the present administration. Consequently, Dr. Adams said the oil company is now reluctant to provide this coverage.
“Exxon sees that this government is reckless and spineless and weak and they are taking advantage of them,” Dr. Adams stated.
Assets and the 2016 PSA
Article 20 of the Production Sharing Agreement (PSA) specify terms related to ‘Rights to Assets’ state that upon expiry or termination of the Agreement, the Contractor shall deliver to the Minister, free of charge, in good order and condition, (fair wear and tear except) all installations, works, pipelines, pumps, casings, tubings, engines and other equipment, machinery or assets of a fixed or permanent nature constructed, used or employed by the Contractor or the Operator in the Contract Area.
It goes on to state that this also applies to any fixed assets relating to Petroleum Operations outside the Contract Area and movable assets owned by the Contractor or Operator and used or employed in connection with Petroleum Operations and located in Guyana for which costs have been fully recovered.
Be that as it may, Vice President Jagdeo told reporters that although Guyana is paying for the assets being used in the offshore production of oil in the Stabroek Block, this does not make the country a part owner of the assets. This therefore means that in the event that an oil spill occurs as a result of the activities in the resource rich offshore acreage, ExxonMobil will be free to sell the assets to respond to such an event.
The VP explained, “It’s a simple thing. You’re not part owner of any company. You don’t own these assets. So, ExxonMobil puts in the investment. They create a company; the company has these assets. We are entitled to receive in the future, 50%, once everything is paid off…you are entitled to collect 50% of future profits and they get 50% and then 2% royalty on the gross…that’s your entitlement to collect.”
On the other hand, Jagdeo said that if the company was to dissolve and sell the assets, Guyana may then be entitled to 50% of the assets. “Now if you have a dissolution of the company and they sell off the assets, I guess we are entitled to 50% of the assets too in the situation where you dissolve the company so I hope that clarifies your question,” he noted.
(Guyana cannot seize and sell its own assets to pay for an oil spill- Dr. Adams)
(pay for an oil spill)
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