‘We have no interest in writing Exxon to change lopsided oil deal’

Jan 01, 2025 News

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…greater benefit is already coming to Guyanese – President Ali

By: Davina Bagot

President Irfaan Ali during his end-of-year press conference on Tuesday told the media that he has no interest in writing U.S oil major, ExxonMobil to engage the company to renegotiate the lopsided Production Sharing Agreement (PSA), signed by the previous administration.

He was at the time responding to a question from this newspaper on why his government still refuses to change the deal to seek greater benefits for Guyanese, even after altering multiple provisions of the contract.

To this end, the Head of State explained that the People’s Progressive Party (PPP) has always been consistent in its position that the deal was “bad”. He however noted, “What we committed to was to respect the sanctity of contracts and that the international law, that has implications for us as a country. Other investors are looking on but what we said was that future PSAs would not have these fatal flaws and future PSAs would not have the type of lopsided arrangements that Exxon had, and we have made those adjustments to future PSAs.”

President Ali went on to point out that the market conditions must also be taken into consideration to ensure policies here do not drive away investment, but strikes a balance to still ensure the greatest benefit comes to Guyanese. In fact, the Head of State highlighted that Guyana has already seen benefits not only from the oil and gas sector, but from the expanded growth in the economy.

He cited initiatives such as the return of the school children’s cash grant which will soon be increased to $50,000; higher pension for senior citizens; a world class health care system that is currently being developed as well as an improved safe environment and education system.

To this end, Ali said, “(I can) show you how greater benefit is already coming to the Guyanese people, how the life of every single Guyanese is improving and you would know if you can tell me with straight face that even your own life is not improving, that you are not driving on better roads, that you are not saving time going to Region Three-imagine if you didn’t have the Crane by-pass road- that you are not going to benefit from the new four lane bridge across the Demerara River that will be free of cost, if you are not benefitting from the $100,000 investment that we are making for every Guyanese above 18 years.”

Kaieteur News however pointed out that countries around the world have changed their oil contracts and asked the Head of State to say what is preventing his government from doing the same. Notably, the President acknowledged that while there are countries that may have renegotiated their oil contracts, there are also countries that are losing investments from the petroleum companies.

He pointed to Suriname as an example where Exxon walked away. On the other hand, he said in Guyana there is a consolidation of assets with investment being attracted. According to him, “We have to understand the balance and what is taking place in the market. The market is not simplistic, now accessing capital for the oil and gas sector has changed dramatically and we had to see where the new policies now from the U.S government will take us because the capital for the oil and gas sector has become more expensive and you have more risk associated because of environmental and climate issues so the cost of capital is also rising so that is the market in which we are operating and we have to be constantly aware of what is taking place in that market from an investment perspective.”

Write to Exxon

When asked if government has written to the operator of the Stabroek Block to seek a renegotiation of the deal, the President made it clear that he has no such intention. He explained, “No, we don’t need an official response (from Exxon). We have made our position very clear that future PSAs, and we have stuck to that and existing PSAs, the sanctity of contract, we respect that. You know this, we have discussed this, many times before.”

Why renegotiate

Stakeholders have argued that due to the drastic changes in the Stabroek Block, Guyana would be well within its right as a sovereign nation to demand greater benefits for its resources. In 2016 when the agreement with ExxonMobil and its partners were made, the country’s oil reserves stood at a just three billion barrels. Fast forward to seven years later, the Stabroek Block is now estimated to hold more than 11.6 billion barrels of oil.

This means that the reserves have almost quadrupled while the country continues to receive a thin slice of the pie, with the oil companies enjoying over 85% of the revenue generated each month. According to the 2016 PSA, Exxon can deduct up to 75% of Guyana’s oil monthly to cover its expenses. The remaining 25% is split with Guyana equally as profits, with the country earning an additional 2% from the contractor’s share as royalty.

(‘We have no interest in writing Exxon to change lopsided oil deal’)

 

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