At his press conference on Friday, Vice President Bharrat Jagdeo shut the door comprehensively on the use of the approval of the Payara licence as a means of leverage to improve the scandalous Production Sharing Agreement (PSA) concluded by the APNU+AFC government in 2016 with ExxonMobil’s subsidiary EEPGL and its partners Hess and CNOOC.
“Let me make it clear that we were not reviewing or renegotiating the production agreement. We were negotiating a production licence and a permit. Most of the fiscal conditions were established in the Production Sharing Agreement. In this case, we were not negotiating any fiscal conditions; not royalty, not profit sharing, nor anything else. It was the licence to develop a facility in the Stabroek area which is governed by the PSA in 2016. I see a lot of people saying you should have changed the fiscal terms. Couldn’t happen!” Mr Jagdeo told the press conference.
He added: “Another group believe that we should (have) held up Payara and not issue the licence and use it as leverage to change the PSA. It is wishful thinking, frankly speaking. It is wishful thinking we could not have done that now”.
Mr Jagdeo said that the government thought it best to sign the agreement as it got most of the changes it wanted in line with the two documents: the environmental permit and the production licence. He pointed out that the PPP/C never promised to renegotiate the contract but said that it would review it.
“The PSA deals with all the fiscal terms that will govern every development which has to be licensed separately in the Stabroek Block Area. So to say that I criticised [the 2016 PSA], our criticisms still stand because we believe the agreement did not best serve the interest of our people. We made a commitment in opposition, not to renegotiate—we said that very clear—but to review this agreement, the Stabroek Agreement, to ensure we get more out of that,” he asserted.
He also made the pragmatic argument that Guyana wants this investment to go forward as planned and that the window for the monetising of oil given the COVID-19 inspired global economic slump and the rapidly rising rebalancing of energy needs with green fuels.
“Secondly, a lot of these companies are losing value in stock exchanges etcetera and they are cutting back on their investment. Because if they lose value, they also have to be willing to raise money, etcetera. If the outlook for the market is not that great, the lenders won’t want to lend into the sector and it becomes riskier. I will be frank about this – we want this investment to go forward. Guyana, on its own, cannot raise US$9 billion (for the Payara well development). That is twice the size of our total economy our whole economy. Our whole domestic product is just over US$4 billion. So we want that because we can’t raise the money ourselves to do that and secondly because there is a stream of revenue that will come to Guyana in the future for its development. I will be frank, we want the development and investments to take place and they are not taking place in many parts of the world. The only way you can get the oil out is to make the investment.”
He added: “More so now, because there is a short window of opportunity. The renewables are yapping at people’s feet. And there may be technology one day that may cause oil opportunities to (dry up), assuming there is new breakthrough technology. We want it go forward but we have a duty to protect the people of Guyana. So all those who believe you have great leverage… we could not. Investors share the view that Exxon wants to invest in Guyana because of the quality of our oil and the low breakeven cost they will make money here and the fiscal conditions. We have to go with that”.
In not addressing the inequitable 2016 PSA and forcing an improvement in its fiscal and safeguard terms, President Ali’s administration is losing sight of two important points.
The first is that it was a PPP/C administration that entered an over-generous deal with ExxonMobil in 1999. Then President Janet Jagan had signed off on a deal that gave ExxonMobil access to 317 blocks offshore when the law limited this to 60 blocks. Whatever one might say about the decision it appeared to be strategic by having the Stabroek Block stretching from Demerara across the entire Essequibo coast. This added a significant layer of protection against aggression from Venezuela which has stalked this country’s development plans for decades.
Notwithstanding the fact that President Jagan’s decision appeared to give the country a layer of important protection as Venezuela would have to think carefully about intruding on ExxonMobil’s licensed area, this did not absolve the PPP/C government from handing over control of a sprawling area that could have been subdivided and offered to others even if the period 1999 to 2008 saw little investor interest in the basin of the Guianas.
The PPP/C remained in office until 2015 during which time ExxonMobil opportunistically declared force majeure because of hostile action by the Suriname navy in ejecting the CGX rig from Guyana’s eastern waters in June of 2000. Suriname posed very little threat to ExxonMobil’s Stabroek Block. ExxonMobil did not lift the force majeure until the resolution of the dispute with Suriname largely in Guyana’s favour in 2007 at the International Law of the Sea Tribunal in Hamburg.
ExxonMobil then succeeded in securing an addendum and extension deed in October 2008 under the Jagdeo administration to modify the contract area and the relinquishment obligation. The PPP/C therefore has an obligation to rebalance the 2016 PSA based on its own weak handling of the ExxonMobil arrangement.
Secondly, no government should accede to office with the intention of ignoring clear and egregious injustices by the preceding administration. The PPP/C administration has already alighted on many of these. The 2016 PSA presided over by former President Granger and his Natural Resources Minister Raphael Trotman is an abomination and they should both be held accountable for the paltry royalty rate, the scandalous provisions for cost recovery and the absence of protections such as the ring-fencing of costs.
Is President Ali saying that his government has washed its hands of this matter and will not act on improving what is the single largest contract in this country’s history and which contract in its construction could have cost this country billions of dollars which this government has an obligation to try to retrieve?
It had been clear from the moment that the PPP/C government sent the Environmental Protection Agency Executive Director, Dr Vincent Adams on immediate leave on trumped up grounds that the PPP/C had already capitulated to ExxonMobil and had already made it clear that the Payara development would go ahead very soon. The hiring of Canadian Queen’s Counsel Alison Redford and a team to revisit Bayphase’s evaluation of the Payara Field Development Plan was really a feint to try to impress the Guyanese people. It didn’t fool many.
The Ali administration has let ExxonMobil off the Payara hook. It still has an obligation to the country to force improvements to the abhorrent 2016 PSA. It has a five-year term to accomplish this and rectify the injustices done to the country and its people. If it fails to do this it would have been derelict in its responsibility to the nation and its people.
