Ram questions Trotman’s signing of new agreement with Exxon

Commentator Christopher Ram has questioned the wisdom of Natural Resources Minister Raphael Trotman signing a new contract with ExxonMobil, arguing that the opportunity was lost to correct some obvious errors in the original pact.

The new agreement which Trotman signed on behalf of Guyana with Exxon and its joint venture partners on June 27, 2016 is the one which yielded an increase in the royalty rate of 1% to 2%. The government has steadfastly refused to release this agreement.

Writing in his oil and gas column in Friday’s Stabroek News, Ram said that the big question was why  Trotman signed a new agreement with Exxon almost a year after it had notified him of the discovery of oil in significant quantities.

Christopher Ram

“Mr. Trotman is presumed to know the Petroleum Exploration and Production Act and that such an agreement covers the entire period during which there is a valid prospecting or production licence. While I have serious concerns with certain elements of the 2008 Addendum, the PPP/C did not modify the 1999 Agreement. That the Contract Area and the relinquishment obligation were modified by the PPP/C are serious matters which Trotman had an excellent opportunity to address, if not redress”, Ram said.

He charged that Trotman’s inexplicable action in signing a new Agreement effectively waived Guyana’s rights to correct some obvious errors by the PPP/C Government.

“In the first place, (late President) Janet Jagan (in 1999) granted the company a Prospecting Licence over approximately six hundred blocks when the law sets a limit of sixty blocks, except where special reasons exist for a larger number. It would not be easy to justify an excess of nine times. The law requires that any extension be accompanied by a reduction of 50% of the remaining blocks still covered by a Prospecting Licence, so that at the first extension 300 blocks should have been given up. One can only speculate that the modification in 2008 was to provide that such relinquishment would not apply”, Ram said.

Ram said that Trotman should have known that if all he did was to renegotiate the rate of royalty that  Guyana will receive this could have been done by an Addendum to the 1999 Agreement as the PPP/C did in relation to their Prospecting Licence.

He said that Trotman has publicly embarrassed himself in failing to understand a 1997 legislative amendment in relation to confidentiality.

“To think that a new 2016 Agreement is the result of a similar failure to understand the relationship between the Petroleum Agreement and the Petroleum Licences is frightening.

After all, it would be well-nigh impossible to correct any conceptual errors at this stage, both on legal and practical grounds. That means that Guyanese now and later will have to live with Mr. Trotman’s misconception for the thirty-year span of a production licence”, Ram asserted.

The issue now is whether section 10 of the Petroleum Exploration and Production Act allows the Minister to abrogate one agreement lawfully made and to substitute it with a completely new agreement. Ram said that Trotman may wish to argue that his decision to repeal the old agreement and enter into a new one cannot be the subject of judicial review as it is a private contract between two parties. Ram added that the Interpretation and General Clauses Act, Cap. 2:01 is also on Trotman’s side by providing that words in the singular include the plural and the power to enter into an agreement must be read as including the power to enter into more than one agreement.

He noted that the Guyana Constitution does not set any limits on the powers of a Minister who is appointed by the President in whom Article 99 vests executive authority.  Ram said that the Judicial Review Act Cap. 3:06 of 2010 provides for any act or omission of a Minister, public body, public authority etc. to be subject to judicial review but such “act or omission must have a public element in the sense that it affects public law rights, obligations or expectations.”

Ram, a chartered accountant and attorney, said it is accepted that the courts have no power to interfere with the actions taken by administrative authorities in exercise of discretionary power.

He noted however that in a recent local case, Justice Ian Chang, Chief Justice (ag.) in B.K. International Inc v Ministry of Local Government and Regional Development reasoned that a contract between two parties involving public expense and public health and welfare had elements of public law and that any decision thereon was subject to judicial review.

 

Key events in Exxon deal

– June 14, 1999: Petroleum Agreement and Prospecting Licence signed by President Janet Jagan as responsible Minister for approximately 600 blocks.

–  Sept. 29, 2001: Exxon declares force majeure due to hostile action by Surinamese naval vessels against the CGX oil rig and drillship C.E.Thornton.

–  Sept. 7, 2007 UN pronounces on Guyana/Suriname dispute.

–  October 2008: Exxon lifts Force majeure status.

–  October 2008: An Addendum and Extension Deed to the Petroleum Prospecting License signed, modifying the Contract Area, the relinquishment obligation, and the initial period.

–  Aug. 2, 2016: Official Gazette reveals that a new agreement was signed between Guyana and Exxon and its JV partners on 27 June 2016. That document has not been released to the public or the National Assembly.

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