Stating that the 2% royalty on oil from ExxonMobil was way below global standards and that the tax regime should have been greater, Presidential Advisor on Petroleum, Dr Jan Mangal says pressure from the citizenry has the potential to influence government to revise the contract with the American company.
“Don’t underestimate the power that people have,” he told a University of Guyana (UG) forum yesterday where he discussed with students the nascent oil and gas sector.
Mere hours after the lively discussion with the youths, the government issued a press release saying that Mangal was not authorized to speak for either President David Granger or the government.
“The Ministry of the Presidency puts on record that Dr. Jan Mangal, Presidential Advisor on Petroleum, is not authorised to speak on behalf of His Excellency, President David Granger or the Government of Guyana,” the terse release said.
It is unclear what statement the ministry was referring to.
Efforts to contact Mangal last evening for comment on the press release proved futile as calls to his phone went unanswered.
It is unclear what triggered the reaction from government since in the main, the two- hour session saw the advisor heaping praise on the President as he took students through a presentation of a “Green Guyana” vision that government has consistently boasted about. Mangal’s contract with the government is expected to conclude in March and he was not invited to a major oil and gas conference which got underway yesterday at the Marriott Hotel with government input.
Mangal told attendees at UG that while he doesn’t speak for government, the upward trajectory Granger envisions for the nation, where oil revenues would be used to develop other sectors such as agriculture, was one they must lead the way with.
It was during the question and answer segment, and follow up probing from the press, that he dealt specifically with the ExxonMobil contract.
Asked if he believed that the contract can be amended, he said that parties in any agreement can decide if they will make changes as both sides need to be comfortable for it to work.
“On the issue of looking around the world and if contracts are changed, contracts are always changed, both parties need to be comfortable. If one party is uncomfortable it will be changed. Guyana is a sovereign country”, he said.
“The evidence is out there from around the world when situations change,” he added.
“Look at the situation with natural gas. People are renegotiating those contracts. Contract is an agreement and people need to be comfortable with it”, he said.
Minister of Natural Resources Raphael Trotman has said that government has no current plans to revisit the production sharing agreement it signed with ExxonMobil in 2016 as it remains adamant that it got the best deal in the circumstances
“I am not at present advised that government has any intention of revisiting that agreement,” Trotman said when asked if government was going to revise the contract.
“As I have said, when we weighed… what we were getting as against what we are not getting, we decided—as I have said before—that this was what we are going to content ourselves with,” he added.
Trotman said that as ExxonMobil demonstrated to the world its faith in investing in Guyana, the country would reciprocate with its allegiance and public gratitude.
Mangal said that it was up to the populace to analyze the contract for themselves, get expert opinions and determine if the country was given a fair deal. While holding back on his personal views, he said “Although I did not answer it explicitly I believe I did. Contracts should always be reviewed. If you have new information it is natural to reconsider with new information,” he stated.
The Petroleum Advisor told the students that persons need to “focus on the issues” and comprehensively evaluate the information at hand and expert views then decide if the contract was a fair one and if they wanted it reviewed …let their views be known to their leaders.
“The way I would be happy and you would probably be happy as well is if a process was followed and you knew who was involved and we knew their competencies and their expertise and they were respected. Did they go out there and bat for Guyana and they did the best they could but I think a lot of people in Guyana are questioning that,” he said.
He told the students that while companies may have the influence over their politicians they cannot have this over the people and they must understand and tap into the power they hold. “Companies can influence politicians. They can’t influence people. The only thing they are scared of is people so that is why it is important for Guyanese to have intelligent debate,” he said.
Looking at norms pertaining to similar contracts from around the world, he noted that the standard royalty is “more between ten and twenty percent, not two percent” which is the figure in Guyana’s Production Sharing Agreement.
He said that while the 50/50 profit share was not bad, tax regimes and royalties see countries getting significant revenues.
Asked if he thinks the contract is a fair one he said that it was not a question for him to answer alone.
“That is a question Guyanese will be asking themselves and should be asking themselves and considering…
“To judge a couple of things I would look at first… is the process of negotiating and then the outcome. With negotiation you would hope to see equal sides on both sides of the negotiating table; in terms of their skills, competencies…then one should also look at the outcome how does it compare to international norms. Then the other things. This is the first project Guyana is trying to attract international investment. Guyana needs to understand that the Stabroek Block is a huge block and that contract encompasses the whole block. Guyana’s oil is in the Stabroek block, it might be there is none in (the) Kaieteur, Orinduik (blocks) if this was a small block you could leave it and say we will get from the other block”, he stressed.
And in response to questions on the amount of blocks ExxonMobil controls, some 600 compared to the 60 the law caters for, Mangal said that is not good for one company owning too much acreage. “Exxon already owns over fifty percent of the acreage in Guyana. That’s not good for Guyana,” he said.
He told attendees that he believes that the industry should be managed in a non—partisan manner by civil servants as giving politicians the power to control the industry was a recipe for disaster and corruption.
“If we take that path changes in government will not impact the oil industry. If your politicians are managing your industry, come elections time the industry is going to come to a standstill and six months after elections, there won’t be anyone working in the industry. You would be scrambling to find people.
“Changes in government will create major upsets in the functioning and operation of the industry. The problem surrounding racial politics as well will permeate the managing of the industry”, he said.
As such, he said that President Granger was working on putting structures and mechanisms in place to ensure a transparent and sound industry well insulated from political interference.
He urged attendees, especially students, to begin preparing and not to settle for mediocrity in whatever fields of work they choose.