Renegotiation of PSA with ExxonMobil subsidiary

Without doubt this is a crucial juncture in the country’s history as it relates to securing a better future for each of its citizens and for succeeding generations. The moment has been made even more poignant by the deep distress that the sugar industry is in, a fitting warning that a prosperous industry that commands the economy today can disintegrate into nothingness one hundred years on leaving those reliant on it – and indeed the country – bereft. It is a fitting lesson for this country and its already controversy-ridden oil future.

With all that has since been learnt about the 2016 Production Sharing Agreement (PSA) between ExxonMobil’s subsidiary, EEPGL and the Guyana Government, it has to be said that the APNU+AFC administration has presided over a deal that was lopsided, exuded dereliction of duty and will cost future generations of Guyanese significant wealth. The APNU+AFC government must take full responsibility for this poor deal and seek immediately to bring ExxonMobil back to the negotiating table.

Only a few points need to be made to pin this government to its calamitous agreement.

-In 2016, the government made a decision to negotiate an entirely new PSA with EEGGL. This may have been justified but the government did not tell the people, who are the stakeholders of the country and the owners of its oil about this. What is one of the most important agreements in the post-Independence history of this country was concluded by the government without as much as a word to the Guyanese public. How could this be acceptable? At whose behest was this secrecy woven and why? Can this be considered the action of a government committed to transparency? The orchestration of this deal represents a grievous breach of trust with the public.

-Not only was the public kept in the dark but the government was scandalously negligent in assembling capable negotiators to face EEPGL across the negotiating table. From the little that the government has said so far, the question of negotiating for Guyana was left in the hands of the Guyana Geology and Mines Commission (GGMC) on a brief authorised by Cabinet and with Minister Trotman taking the lead role in this process. There are many competent Guyanese abroad in the oil and gas industry who could have been enlisted to face the uncompromising and predatory instincts of ExxonMobil. There were several friendly countries and reputable international institutions that could have been mobilised to provide technical assistance and advice to enable a fair deal for Guyana and its people. After all there was no pressing deadline. The failure of the government to marshal a team capable of matching wits with ExxonMobil raises questions about the motivation for this breathtaking failure.

-Having concluded a secret deal, when it finally disclosed that there had been a new one, the government argued that it should remain shrouded. Several flimsy arguments were provided to support this position. This behaviour enlarged the troubling tendency of the government to withhold information on the PSA and by doing so, raising concerns about underhand deals. By the time the question of a signature bonus arose, the government realised that it could no longer suppress the agreement. It later released the PSA which confirmed in black and white that the government had received a US$18m bonus from ExconMobil and in contravention of the constitution it was being kept in a Bank of Guyana account.

-Then the actual terms of the agreement were evaluated and discussed by various commentators and experts. The fiscal benefits were deemed to be miserly. This mirrored a finding by the International Monetary Fund on the good deal that ExxonMobil got from Guyana in 2016. The US$18m signing bonus was seen to be a pittance compared to what had been surrendered by this country to ExxonMobil.  The 2% royalty was embarrassingly on the low side even for a profit oil sharing model while the tax burden faced by ExxonMobil was negligible.

-There was no correction of or compensation for the distribution of 600 blocks to ExxonMobil in 1999 when the maximum allowable was 60.

-A new stability clause inserted into the PSA neutralises the government’s ability to comprehensively legislate for the oil and gas sector. It says at Article 32.3 “If at any time after the signing of this Agreement there is a change in the laws of Guyana whether through the amendment of existing laws (including the hydrocarbons law, the customs code or tax code) or the enactment of new laws or a change having the force of law in the interpretation, implementation or application thereof (whether the change is specific to the Agreement, the Contractor or of general application) and such change has a materially adverse effect on the economic benefits, including those resulting from the fiscal regime provided by this Agreement, accruing to the Contractor hereunder during the term of this Agreement, the Government shall promptly take any and all affirmative actions to restore the lost or impaired benefits to (the) Contractor, so that (the) Contractor receives the same economic benefit under the Agreement that it would have received prior to the change in law or its interpretation, application, or implantation”.

-Throughout the public discussions on the 2016 PSA, Minister Trotman has characterized the changes to the 1999 pact as minor. This is a gross public deception and the minister and his government should be held accountable for it.

Just for good measure, Article 32.1 also says that if the Guyana Government wants to amend, modify or alter the PSA it cannot do so “without the prior written consent of (the) Contractor”.  As reprehensible and repugnant as that imposition is, it should be immediately tested by the government.

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