The Alliance For Change (AFC) is calling for the government to level the playing field by applying the new fiscal terms it has announced for oil contracts to ExxonMobil and its partners.
The call comes following an announcement by Vice President Bharrat Jagdeo that the new model oil and gas Production Sharing Agreement will see big changes such as the upping of royalty from 2% to 10%, corporation tax of 10% and a limiting of the amount of blocks for companies. He made this statement after announcing that the government will be auctioning 14 offshore blocks next year instead of this year.
The 2016 PSA based on a model from the PPP/C’s Ramotar administration has been trenchantly condemned for six years over the paltry 2% royalty, the 75% cost recovery ceiling and an arrangement that sees the government paying corporation tax for ExxonMobil and its partners.
ExxonMobil and its partners are the only producers of oil in Guyana and operate in the largest offshore block.
AFC’s Member of Parliament and the APNU+AFC’s shadow Minister of Oil and Gas David Patterson told a news conference on Friday that while the move to 10% royalty is a step in the right direction, the government needs to ensure that the playing field is level. He said that the information presented by Jagdeo clearly does not reference the existing PSA with Exxon.
He reminded that Exxon has announced 33 discoveries to date and currently just about four of their developments have been given the necessary approvals with the Liza 1 and Liza 2 fields operating. Patterson said that with more discoveries by Exxon and more developments, then the government has the opportunity level the playing field.
He said that the government can “grandfather” Exxon’s first four developments and then all future developments should be subjected to the new PSA model.
“We will grandfather even in the sense that the old deal can work with the four as a matter of compromise however for the other 29 discoveries you shall be subject to review regime and everyone in the oil industry will be on a level playing field.
“You can argue the grandfather in Exxon for the first four years in recognition for their pioneering work that they would have done first discovering oil on the block. But to totally exclude them by not mentioning anything about renegotiation is a complete smoke screen. They have the largest block—26,000 square kilometres—which would be literally at least 13 or 14 times next greater than their competitor and which means that the probability of more oil finds in that 26,000 square kilometres is exponentially higher. So to give them a free pass for that entire block is according to the Alliance For the Change unacceptable,” Patterson said.
Meanwhile, former head of the Environmental Protection Agency (EPA) Dr Vincent Adams said that the government is trying to use the updated PSA to dissuade calls for a renegotiation with ExxonMobil. He accused the government of “protecting” ExxonMobil and its interest while noting that potential Guyanese investors will be severely disadvantaged.
“The fundamental business and moral principles that are expected of every democratic society and country is to have open, free and fair competition. That is now being shut out in order to protect Exxon, and they [government] want to change the conversation from the renegotiation pressure they are getting.
“I am advocating to put politics aside and let both the opposition and the party in power come together, put together a team of knowledgeable experts to come up with what’s best for the country of Guyana and spread it across not from what’s the past contract and the future contracts…that would be fair, that would be setting the level playing field and that’s where we ought to be going. So, don’t come up with this gimmick,” Adams said.
The AFC also called on the government to address the issue of “farming out” of the oil blocks. They reminded that special companies were set up to bid for the blocks and then immediately resold them to large oil companies.
