A January 29th 2020 letter from anti-corruption watchdog, Global Witness to ExxonMobil’s Country Manager has quantified the likely loss to Guyana from the disastrous 2016 Production Sharing Agreement (PSA) at a whopping US$55b. That figure is about 26 times the highest ever external debt of the country.
The computation was commissioned from OpenOil, a Berlin, Germany-based group which aims at an open data framework for managing natural resources at a supranational level and undertakes cost-benefit analyses.
The Global Witness letter, which sought a response from ExxonMobil prior to the release of a report on Guyana, stated that “OpenOil has analysed what revenue Guyana will receive if Exxon produces its current estimated 7.9 billion barrels of oil … OpenOil has used data provided by Rystad and Exxon’s public statements and assumes a price of US$65/barrel. According to OpenOil’s analysis, the Stabroek licence gives Guyana only a 52 percent share of oil revenues. A 69 percent share would have been reasonable. The IMF states that a reasonable government take for oil projects is between 65 and 85 percent,” the letter said.
It added: “As a result of this deal, Guyana will receive an estimated US$168 Billion and not US$223 Billion. Guyana will lose out on up to US$55 billion over the 40 year life of the license. In 2018, the IMF reportedly stated that Guyana’s oil licenses ‘enjoy royalty rates well below what is observed internationally’. In 2018, OpenOil stated that ‘Stabroek yields relatively low government take by almost any standard’. This analysis shows that the terms of the Stabroek licence are exploitative and unjustifiably bad”.
The letter also stated the obvious that Exxon should renegotiate the Stabroek block licence so that Guyana obtains a fair deal.
Aside from the mind-boggling scale of the projected surrendered revenue which as commentator Christopher Ram pointed out translated into a monumental figure for each woman, man and child, the Global Witness letter mirrors many of the arguments that have been aimed at the APNU+AFC government over the flawed 2016 PSA.
ExxonMobil was either able to strong-arm or pull the wool over the eyes of the government in the process leading up to the conclusion of the much-criticised PSA which will see the US company and its partners profiting handsomely at the expense of Guyana and its people.
Global Witness’s letter to ExxonMobil helps to underscore three realities. The first is that the APNU+AFC government’s management of the oil and gas sector since it entered office in May 2015 has been nothing short of reckless and negligent. Aside from the exploitative terms of the 2016 PSA which were clinched in total secrecy, the absence of vital pieces of legislation – such as for local content – as the term of this government comes to an end, the incapacity of key regulatory bodies such as the Environmental Protection Agency and the lack of the requisite expertise in the Department of Energy marks this government as incompetent and incapable of the stewardship of what has been the biggest development in the country’s post-independence history.
Second, whichever of the current contestants accedes to office after the general elections on March 2nd there must be a full-scale inquiry into how the 2016 PSA was concluded to determine whether the interests of the country and its people were eroded by corrupt behaviour or simply expansive dereliction of duty. Such an inquiry – not the stalemated dozens launched by the Granger administration – should be done under the auspices of an international body such as the United Nations and expose clear lines of accountability.
At various times but without the clarity that is sorely needed, the public has been told that the responsibility for the terms of the 2016 PSA lay with either a small number of persons at the Guyana Geology and Mines Commission’s (GGMC) Petroleum Unit or the then responsible Minister Raphael Trotman and Cabinet. The fact that Guyana was bereft of negotiators who could hold their own across the table from ExxonMobil is prima facie evidence of the initial failure of the government to act responsibly and with due diligence. There must now be a forensic probe of all the interactions between and among the GGMC, Minister Trotman, ExxonMobil and their various employees. A major area of interest would be the role of President Granger himself. He has presented himself to the public as a leader detached from the details and minutiae of important areas like oil and gas. Did President Granger instruct that a new PSA be concluded in 2016? If so was he kept abreast of the negotiations? Did he seek expert opinion on the major terms of the deal? Was the deal presented to him prior to signing? Was there a full discussion at Cabinet which he presided over? These are the questions that the President and Cabinet records will have to speak on in a probe of this unsatisfactory deal.
Third, with the General and Regional Elections now less than a month away, the contenders for the Presidency must outline in unambiguous terms their proposals as it relates to the 2016 PSA. There should be no doubt that notwithstanding the apparent watertight stability clause in the agreement, that the 2% royalty rate among other oppressive attributes such as the open-ended upper limit of 75% of oil revenues being assigned to expenses, must be revisited. APNU+AFC would now have to take a decision on whether to stand by its undue forfeiting of the oil wealth of this country or commit to clawing back what should not have been given away. The opposition PPP/C’s posture seems to be to gain more from the deal without a renegotiation. That would not be acceptable in the circumstances.
In the remaining days before the elections, members of the public, NGOs and watchdog groups should insist on clear positions on the 2016 PSA from the contenders and require from them a workable plan to have the terms of the deal modified.
