Dear Editor,
Exxon’s CEO Darren Woods is scheduled to attend an Energy Conference in Georgetown, Guyana tomorrow.
The conference is a sort of celebration of Guyana’s arrival as a member of the prestigious Oil Club. Attendees include Ghana’s president Akufo-Addo, Suriname’s president Santokhi, Barbados Prime Minister Mottley, the world’s most celebrated Oil historian/economist Daniel Yergin, and several Ambassadors of ABC and EU countries based in Georgetown, Guyana.
Who will be courageous enough and be willing to put in a word for the Guyanese people? You may say: of course, the Guyanese Vice President Jagdeo speaks for the Guyanese people – but therein lies the whole purpose of this essay.
Oil had been discovered in 2015. An oil contract (called a PSA, Production Sharing Agreement) had been signed in 2016 by Guyana’s then Minister of Energy, Raphael Trotman. A single Minister’s signature made the contract binding and will remain fixed for the life of the contract, 30-years. The contract had been negotiated in secret, kept secret for over a year. After much public agitation and protest, only then President Granger relented and made the contract public.
To say the contract had been rigged, the nation had been sold out, is an understatement. There is no evidence of a negotiation – that some 33 Articles and over 100 Clauses of the contract had been analyzed and vetted with the help of Minister Trotman’s staff and hired consultants. End result: The PSA provides for no corporate income tax to be paid by oil companies, 2% royalty and a 50/50 split of the profits after Cost Recovery capped at 75% is taken off the top. We are told Guyana’s share of “profit oil” will increase as the Capital and other costs are amortized presumably on an expedited scale. The PSA provides for no “ring fencing” – this means the spreading and commingling of the cost of ongoing development of new wells over the next 30 years will keep the 75% cost recovery running for as long as possible. This will minimize profit oil, thus making Guyana’s “take” as low as possible for as long as possible. There is no pro-forma schedule to show how Guyana’s share of profit oil will rise from 12.25 barrels to say 30 barrels out of every 100.
Guyana’s per capita income in 2020 is listed at US$4,500, with a population of 780,000. Hospitals and schools are inadequately staffed and lack basic supplies and equipment.
Recently a local newspaper carried a story of a 17-year-old High School student who was successful at his exams – but reported that he had to sell plantain chips to earn money to pay fees for after-school tutoring and pay bus fares to and back from school. Not enough trained teachers, no libraries, almost 50% of students must pay for after-school lessons to help them pass their exams.
Such is the socio-economic condition of this nation. And, it is stuck with a PSA that cannot be renegotiated; must remain in effect for the next 30 years. If you have ever heard of a rigged, lopsided contract, this is it.
Two countries Guyana and Suriname share the same oil basin. What Guyana is foregoing or losing? The difference in royalty of Guyana’s vs Suriname’s is 4.25%. This works out to $24.86 billion dollars on 9 billion barrels of crude reserves from one oil block. (9 billion barrels times average price $65 times 4.25% = $24.86 billion). This is what Guyana is losing/foregoing on Royalty alone on one oil block. Over the next 30 years on estimated reserves of 30 billion barrels of crude the losses will amount to many more billions.
Guyana’s loss: Windfall gains to Oil Companies shareholders.
Darsh Khusial, a leading activist of the Oil & Gas Network estimated that Guyana will lose an estimated $91 billion on 30 billion barrels crude reserves.
How did a poor, small country like Guyana get caught up between such a rock and a hard place? Why are both the APNU+AFC govt (2015-2020) and the current PPP govt refusing to ask Exxon to come back to the negotiating table to make the contract just a little bit fairer. Just give us the same 6.25% royalty Suriname gets and a 15% profits tax (Suriname’s 36%) – and the Guyanese people will be happy.
This much is clear. Both leaders were desperately afraid that if they said yes to renegotiation Exxon has the power to swing the election to their opponent. Exxon exploited the fears of both leaders. Exxon literally owned and called the shots in Guyana.
This contract represents a humiliation imposed on the Guyanese nation. This contract must not stand. It represents a loss to the Guyanese nation of an estimated $91 billion on 30 billion barrels over 30-years. The contract can be renegotiated providing both parties – host gov’t and Exxon – agree.
Of all the heads of state and the noted oil economist attending the conference – PM Mottley, PM Santokhi, Ghana’s president and Dr Daniel Yergin – would any one of them be moved by the unfairness of this contract – to make an appeal to the good conscience of Exxon, gently nudge Mr Darren Woods to agree to renegotiate this contract, just to make it a little bit fairer for the 780,000 people who live in Guyana. A bare 6.25% royalty and 15% profits tax rate (Suriname’s is 36%) – and liability insurance in the event of an oil spill will suffice to make the Guyanese people happy. Dr Jan Mangal, an oil expert once the advisor to a previous Guyana president had this to say: A PSA contract between Host country and Exxon and its partners is like a good marriage – it must last for 30 or more years.
Yours truly,
Mike Persaud
