Every Man, Woman and Child in Guyana Must Become Oil-Minded – Part 30

The 2016 Petroleum Agreement (Continued)

Today’s column continues a review of the Esso/Hess/Nexen Petroleum Agreement signed on June 27, 2016 and publicly released by the Government of Guyana on December 29, 2017. Last week’s column noted a number of missing parts of the Agreement as well as what the Agreement refers to as a Bridging Deed. That Deed is defined in Article 1 as a separate Agreement signed “on or around the June 27, 2016”, to replace the 1999 Agreement and the 1999 Petroleum Prospecting Licence. Readers will recall that then President Janet Jagan signed the 1999 Agreement in violation of the Petroleum Exploration and Production Act (the Act) to the extent that the company (Esso) was granted approximately six hundred blocks instead of the sixty blocks permitted by law.

The 1999 Agreement and Prospecting Licence appear to have been contained in a single package and included a full description of the blocks and a map of the area allotted to the oil company. The 2016 Agreement merely states that on that date Minister Trotman granted a Petroleum Prospecting Licence for an initial period of four years! In other words, the whole idea of Mr. Trotman was to pretend that the 1999 Agreement never existed. Trotman has to be given credit – this takes legal gymnastics to a completely new level.

Just another breach

To add to this set up, Trotman obviously decided to complete the concealment of the 2016 Agreement by failing to comply with section 16 (2) of the Act. Here is what section 16 states:

(2) The Minister, shall, as soon as may be practicable after a licence has been granted, cause notice of that fact to be published in the Gazette stating the name of the licensee and the situation of the land in respect of which the licence has been granted.

But there is more to this legal gymnastics. A prospecting licence can only be granted on the basis of an application made in accordance with the Act and must contain a whole range of information set out in the Act and Regulations, including proposals for local content in terms of employment and the procurement of goods and services. Did Trotman decide that he could bypass the provisions of the legislation and do as he chose? Clearly he does not consider himself bound by any laws and free to violate them as he chose.

Missed opportunity

Trotman also missed a glorious opportunity to apply the provision of section 22 (2) of the Act to ensure that Guyana had a stake in the entity. Here is what the sub-section states:

(2) There may be included in a petroleum prospecting licence provision with respect to the exercise by the State, or any agency thereof identified in the licence, of an option to acquire on stipulated terms, or on terms to be agreed, an interest in any venture for the production of petroleum which may be carried on in any block or blocks to which the licence relates.

Imagine the leader of one of this country’s leading political parties deciding not to take up an equity in companies exploiting a valuable, non-renewable resource. Trotman must surely know that the Government would not have had to pay upfront for its share of equity and could have elected to exercise a carrying interest. Is this sane or irresponsible.

Further evidence of irresponsibility within the Ministry of Natural Resources is the release of an internal memo dated December 27, 2017 responding to a request from the legal advisor in the Ministry on the number of blocks which can be allocated to an applicant for a prospecting licence. It is hard to believe that after all that has been said and written on this subject Trotman and his legal advisor do not know the answer. It is less hard to understand why the Ministry would release the response by the Commissioner (ag.) of the Geology and Mines Commission – to throw him under the bus!

Not too veiled threat

Also released and publicised is a BRIEF prepared by the Commissioner and titled “Technical Meeting Between Esso Exploration And Production Guyana Ltd, Operator for the Consortium under the Stabroek Block Petroleum Prospecting Licence and Officials Representing the Guyana Geology and Mines Commission, at The Campus in The Woodlands, Texas – April 4, 5, 2016.”

Here is the first of two extracts from that brief:

“Esso then confronted with GGMC the matter of their Contract and Licence. This was anticipated some years prior when it was obvious that in the remainder of the licence term, all the exploration work to be done could not be achieved. This was despite their escalated intensity from 2008 when the Guyana/Suriname boundary resolution facilitated their return to activity.”

This is clearly understandable: that is why the number of blocks is limited to sixty and a 50% relinquishment arises after the first period of four years and the first extension after three years. The prospecting licence comes to an end after ten years and the Minister has no power to go beyond that time. To give an insight into ExxonMobil’s attitude to the Guyana team, the Brief reports that “For Esso to start spending, the replacement petroleum licence and agreement is needed, along with the undertaking that the Development Plan and permitting would be done in good time.”

In other words, despite Esso’s knowledge of the laws of Guyana, the Addendum signed by the PPP/C Government extending the period and adjusting the relinquishment provisions to take account of the period of force majeure, having discovered oil, Esso says we want a new agreement, otherwise we are not investing, even if the Government has to violate the law.

And we caved in – all for US$18 million.

Around the Web