You do not have to be an oil expert to appreciate the fact that the Exxon contract is skewed in favour of the oil companies. We do not have to be oil experts to discern the many instances where we stand to lose and where our future generations stand to lose. Moreover, we do not have to be oil experts to appreciate the fact that other countries have gotten far better deals for their oil and that Exxon had tried in several instances to rob some poor nations who have demanded that their Exxon contract be renegotiated and were successful.
As a non-expert in oil we do understand that we are contracted to pay a hefty US$460 million cost recovery with an endless list of cost recoveries that will deplete the revenue by 75%. Then after deducting operating costs the profit available is split 50:50. We pay all interest on pre-contract loans taken by Exxon; our royalty is a paltry 2%; our signing bonus is a beggarly US$18m compared to other countries; there is no ringfencing which means the cost recovery can be inflated; we gave incomparable tax concessions (VAT and duties); there is no corporation tax and we pay the income taxes for Exxon. More than 250 classes of uncapped items imported will not be inspected by GRA; we pay all litigation fees; and we pay for donations made by Exxon. There is no provision for any adverse effects on fishing grounds, coastal communities or neighbouring countries; provisions for oil spills are yet to be seen. The Minister must give 7 days notice if he wants to visit the site; there is the unconstitutional Stability of Agreement clause, and the list goes on. We do not have to be oil experts to understand this.
In addition, Annex C is evidence that we are not going to get any reprieve from the operational cost as well. There are many items of expenditure which are disallowed in other countries but which are allowed in this Exxon contract. This again will put a serious dent in the oil profit available for splitting. Even the crumbs will be fewer. When this is looked at in the light of our inability to accurately audit these costs we will then appreciate our serious debilitated condition. The IMF has even urged the government to commence the auditing of all exploration and development costs by ExxonMobil, and it was pointed out that GRA has limited skills for this type of audit. Despite this GRA is now doing the audit. Indonesia had 600 persons involved in the verification of cost recovery claims by Exxon, and they failed. Tanzania also had a problem with verifying oil costs. Will GRA be able to do that?
Oil production is projected to begin in 2020 but the government has failed to put specific measures in place to ensure that cost recovery claims can be authenticated. Our future benefits from oil seem bleak.
In July 2016, Minister Trotman had said that Guyana will be dictating its own terms and conditions for the companies which are drilling for oil, and was adamant that no one was dictating to the government. Unfortunately, soon after he said this he became signatory to the worst lopsided oil contract this world has ever seen. A contract which has become an affront to all Guyanese, one which was negotiated by a Harvard trained negotiator and his band of oil experts. All Guyanese should call on the government to renegotiate this contract.
From all the indications, Exxon has all the trappings of a state within a state. This new state has a name: Exxon Guyana!