ExxonMobil developments

On Wednesday the Ministry of Natural Resources invited the media to an event at the Marriott Hotel where US oil company ExxonMobil was to brief Government of Guyana officials on the latest developments in the commercialising of the country’s offshore oil riches. There were some perfunctory remarks by the Minister of Natural Resources Raphael Trotman after which the media was asked to leave.

Serious media people shouldn’t be made to waste 90 minutes of their time for trite remarks from a minister before being unceremoniously asked to leave. That is apparently the work of GINA and presumably the state media. Secondly, the media is as important a stakeholder as any other in the early days of the oil and gas industry and should certainly be privy to these briefings. Have the government and ExxonMobil taken a decision to exclude the media from such briefings and if so can the government explain why?

On the same day, ExxonMobil did also brief the Leader of the Opposition Bharrat Jagdeo and his team at his office. It was Mr Jagdeo who later spoke to the media about some of the contents of his briefing. Up to that point, the government had provided no explication of its earlier briefing from the US oil company. Mr Jagdeo disclosed that ExxonMobil had stated that it would not be investing in the government’s private/public onshore base at Crab Island, Berbice which Minister Trotman had said last December would attract an investment of US$500m and create 600 jobs.

Mr Jagdeo then questioned “Where is this (US) five hundred million dollars coming from?” He pointed out that there is no money in the 2017 budget for the facility nor has he heard of any loan that would be given nor is there a grant. “So where the money is coming from?” he asked. He floated the possibility of the government directing ExxonMobil to use the Crab Island facility in the quest for local content and concluded that this was a pie-in-the-sky project.

“If foreign investors come to this country and they invest in this facility…and ExxonMobil is directed to procure the services from this facility based on local content legislation [and] even if the cost for these services are not competitive, then what happens?” he asked.

Mr Jagdeo does have a point. One would have thought that since the country is now on the threshold of producing oil, a well thought out plan for an onshore support base to create jobs and synergies with ExxonMobil’s operations would see immediate investment interest from the US company or an ironclad assurance that it would use this facility. This apparently is not the case and it has to be explained by the government why there would be no investment by the US oil company and if in light of this the viability and feasibility of the proposed Crab Island facility is questionable.

Having not taken the opportunity of briefing the media on its session with ExxonMobil the Ministry of Natural Resources took umbrage at Jagdeo’s pie-in-the-sky charge. The Ministry  in a statement said that in all the models examined around the world it is very rare for the international operating companies to invest in a supply base and rather more frequently the case to have public/private partnerships, or the private sector only, do so.

That may be so but it is difficult to believe that given the importance of the onshore base to its scheduled operations that ExxonMobil would not consider investing in it and giving itself greater control of what happens onshore. If ExxonMobil isn’t investing in the facility where indeed would the US$500m investment come from? Hopefully not out of the government’s coffers or as an offset of its projected earnings once oil production begins. The ministry did say that the Crab Island facility would find use as other companies would be conducting oil exploration and production and the facilities that currently exist along the Demerara River would be insufficient as the industry develops. However, to follow its train of argument with ExxonMobil, those companies should similarly not want to invest in an onshore base.

What may be the issue here is that Crab Island may not be the optimal location for the onshore base and seasoned campaigners like ExxonMobil are therefore unlikely to participate in any project that is out of kilter with its calculations. What decision making was involved in the siting of the Crab Island project? Was the decision making shaped to take account of the specific requirements of ExxonMobil’s operations as a means of maximizing local content? Surely any onshore base with local input should be synchronized with ExxonMobil’s operations completely until other wells are brought in.

In early September 2016, the Ministry of Natural Resources announced its intention to set up an onshore oil and gas logistics and supplies facility with the aim of optimising opportunities. Minister Trotman at the end of December last year said that interviews with a number of  local and international interested parties were held at the end of October and early November, 2016 and that Cabinet had since given its no-objection to the Crab Island site. Construction, he said, would start this year and the work would be equivalent to US$500m. What was the basis of these discussions and was ExxonMobil fully involved? What combination of factors and on whose word was the decision to establish on Crab Island made? With no firm commitment on whether ExxonMobil would be utilising this base there would be valid concerns that the government is getting in over its head with a costly project that may end up having few takers and users.

Is it perhaps the case that an adequate onshore base could be delivered for far less than an investment of US$500m? While the locale may offer deep water access to the Atlantic, production staff transiting Crab Island would have to travel significant distances and there are other issues such as the availability of support facilities.

Openness on these issues from the government and ExxonMobil is imperative. This is all the more important considering the seminal events now taking place in Washington DC where the former ExxonMobil boss Rex Tillerson is now the Secretary of State. President Trump will clearly not be shy about taking measures to favour giant oil companies and other favoured sectors. On Friday, as reported in the February 4th edition of Stabroek News,  his administration began moves to roll back measures in the Dodd-Frank Wall Street reform law  aimed at ensuring transparency. By a 52-47 vote, the Republican-controlled senate, using an infrequently employed law known as the Congressional Review Act, overturned a rule requiring companies like ExxonMobil to publicly state taxes and other fees paid to foreign governments. ExxonMobil and other US oil firms had argued that the measure put them at a disadvantage in relation to other oil majors.

This is a retrograde development considering the high levels of perceived corruption here and the recognition that entry to the club of oil producing countries could expose Guyana to many of the threats of the resource curse. Once President Trump signs the measure ExxonMobil is likely to feel that it is not obligated to divulge a range of information to the government here and the Guyanese public. It is left to be seen how the Guyana Govern-ment will respond and how its intended accession to the Extractive Industries Transparency Initiative will ensure that all payments by ExxonMobil are fully publicised and accounted for.

The possible role of Mr Tillerson in all of this will come under increasing scrutiny. US Senator Ben Cardin who along with former Senator, Richard Lugar crafted the transparency provision had this to say “it should be lost on no one that in less than 48 hours, the Republican-controlled Senate has confirmed the former head of ExxonMobil to serve as our secretary of state, and repealed a key anti-corruption rule that ExxonMobil and the American Petroleum Institute have erroneously fought for years”.

Guyana needs to tread carefully and determinedly in its relations with ExxonMobil and full openness is a key asset in that process.