On February 14th, the third anniversary of the Cummingsburg Accord which masterminded the victory of the APNU+AFC coalition at the 2015 general elections, President Granger was asked whether the 2016 Production Sharing Agreement (PSA) between his government and ExxonMobil subsidiary, Esso Exploration and Production Guyana Limited (EEGPL) would be renegotiated. His answer did not rise to the occasion given the very serious issues at stake. It was typical waffle.
He stated that there was “no prospect” at this time for a review of the PSA but the matter was engaging the attention of Cabinet.
“These matters are before Cabinet and it depends on what determination Cabinet arrives at but the contract is an agreement between two parties and these things have to be approached very carefully. There is no prospect at the present time that it is the intention of Cabinet to review it but as I said it is before Cabinet”, he told reporters.
Considering that President Granger and his Cabinet presided over the secret renegotiating of perhaps the single most important contract in the independence history of this country, there can be little confidence in the public that his government will do the right thing and do so transparently.
Yet, urgent action has to be taken. It is clear from the debate that has occurred around the contract, after being hidden from public view for more than a year, that Guyana has given up too much and the agreement is littered with flaws that could allow Exxon and its partners and other companies to benefit beyond the reasonable. If President Granger and his government have not realised this as yet, then they have clearly not been paying attention to the public feedback or have decided to turn a blind eye to it.
For all of the deserved criticisms levelled by APNU and the AFC while in opposition of the PPP/C government in relation to the Amaila Falls Hydropower Project and its financial modelling, that was a project that would have cost around US$1b. Given the current size of the oil reserves in the Stabroek block – 3.2 billion barrels of oil and counting – by its inept negotiating the APNU+AFC government would have surrendered far more to Exxon and its partners. How can that be any different from the charges of negligence that had been levelled by the two parties and other sections of society at the Jagdeo administration in particular?
The entitlement of future generations of Guyanese from Guyana’s oil find has been put at risk by this agreement and that is what the Granger administration must recognise and act on. It is not what the country must be contented with as Minister Trotman has presented it – political condescension at its worst – it’s a question of what the country and its people are entitled to from this deal and should have had with better negotiating. While the agreement and its production sharing model had its genesis in 1999, the APNU+AFC’s decision to revamp it in 2016 required the administration to take full cognizance of the Liza-1 discovery and the prospect for similar-type finds which have since occurred in the Stabroek Block. The government clearly did not employ the Liza-1 discovery to its advantage in the 2016 negotiations.
There has been enough talk about this deal to have cemented in the public’s mind the imbalance that has been created. At the very least, the royalty payable to the country should be have been considerably higher than 2%, tighter controls should have been in place to adequately monitor what EEPGL claims as production costs prior to arriving at profit oil, more stringent provisions for environmental protection should have been incorporated and the signing bonus should have been higher
On its own, given all that has transpired, Cabinet will be unable to arrive at a satisfactory solution to this deficient PSA. An expert team from the IMF has already frankly commented on how good a deal EEPGL extracted from the Guyana Government and this in itself is a searing indictment of the country’s negotiators.
The government needs to snap out of its stupor and act now on the PSA. One reasonable option is to take this PSA and submit it for review by a group of recognised industry experts for a determination on exactly how much more Guyana and its people should have gotten from this deal. On conclusion of their assessment, the government should draw up a list of areas for immediate redress and invite ExxonMobil back to the table.