Dear Editor,
There is a clause in the contract that deals with the subject of renegotiation. To paraphrase: it says it can only be done with the agreement of both parties. How does one party (GoG) secure the agreement of the other (Exxon)? Robin Singh (SN, Oct 8th) says you must have “bargaining chips” to induce Exxon to agree. One lawyer says, “Why would Exxon agree to anything, if it has to give up billions of dollars?” President Ali has expressed his views twice. First time – You do not renegotiate with an Oil Giant, “that is like renegotiating with a Superpower”; (2) Second time, “You have an existing contract. You think that is how it happens. That you can just walk in one day and decide I had this contract with you. I am changing it now”.
We don’t need experts in the field of psychoanalysis to help us comprehend President Ali’s thinking on this matter. The words he spoke were simple enough. You do not renegotiate with superpowers, same with oil giants. His second statement invites discussion. You do not wake up one morning and decide “I am [going to] change it now”. Well, of course Mr. President, it is not something that pops into your head upon waking up one morning. It is a process. Making of national policy. Your Cabinet collectively reaches the conclusion that the contract is lopsided in favour of Exxon – too many billions of dollars will be lost/foregone to Exxon. Articulate reasons for renegotiation; not reasons not to renegotiate. Communicate your gov’t’s case to Exxon. Ask for a face-to-face meeting to discuss the fiscal terms you need to renegotiate. Prepare the case.
No other PSA around the world provides for such low royalty (2%); such high CR (75%); Absence of Ring Fencing; Zero rate profits’ tax. Prepare to negotiate for better terms on each item – terms that are aligned with other standard PSAs. What happens if Exxon balks and scoffs at your gov’t’s request for talks? Do you have options? The Government of Guyana owns the oil resource – and has all the leverages of a sovereign host country. Oil expert Tony Paul once advised: “No permits for new wells or oil fields”. There is nothing unreasonable about communicating to Exxon that your gov’t intends to exercise these leverages to obtain reasonable fiscal terms for your oil resource. Obtaining the other party’s agreement can never be: You ask, the other party says no – and you are done. The literature on negotiations talks about a lot of jostling, pushing, and shoving between parties.
The conscience of the world (expressed in the WSJ, NYT, Bloomberg, U.S. Con-gressmen and even the WH, professor at Columbia University) – all know that Exxon is ripping off Guyana. Exxon knows that it pressured Trotman to sign on the dotted line. Exxon is manifestly manipulating the leaders of both PNC and PPP gov’ts. Exxon has exploited the weak leaders, weak laws, a racially-divided state – to obtain that contract. Trotman himself says he had been pressured by Exxon to sign. The big mistake of the GoG is to lay down a firm No Renegotia-tion policy – and then over the past 3 years employing so-called experts (Randy Persaud, Joel Bhagwandin, Bharrat Jagdeo) to articulate reasons against renegotiation. [Why not a nuanced policy that leaves the door open for renegotiation?].
A list of false reasons: Sanctity of contract. Guyana’s PSA specifically provides for renegotiation with consent of both parties. Invoking the sanctity principle is nonsensical. Joel Bhagwandin confuses renegotiation with nationalization – and scares the nation: Guyana would end up like Venezuela. U.S. gov’t would collude with Exxon to oust the Ali/Jagdeo gov’t, if it were to demand renegotiation. This is a blatant falsehood. The U.S. government has not worked like that since the Cold War ended. Equating a 30-year oil contract with a contract to purchase a house, a car, and food crops. Huge Exxon investment ($30 billion?). Guyana must show gratitude and sacrifice the need for a Fair Value contract. False concept – only exploration cost is risk money. Guyana did not invest “one fat dollar”; therefore gratefully accept what you are offered. (In all PSAs, host countries did not put up any CAPEX. That is the BM, Business Model).
Employing folks like Jagdeo, Bhagwandin, Randy Persaud and a dozen anonymous bloggers to push anti-renegotiation propaganda is really a blatant attempt to self-delude the government itself as well as the Guyanese people. These folks convey the impression that they work for Exxon. They are plainly arguing the case for this contract to remain the law of the land for the next 30-years. These men should be fired. They are preparing the nation – à la Jim Jones cult – to swallow a dose of poison. You become self-delusional, you fall under the spell of oil giant Exxon, then you swallow the Kool-Aid. My simple Math: Guyana loses $37 billion on royalty alone (compared to Suriname’s royalty rate). [11 billion barrels times 4.25% times Average price $80 a barrel = $37 billion].
The OGGN group has always insisted Guyana is losing $100 billion on 11 billion barrels of crude. Find more detailed information at Oggn.org. The OGGN group has always insisted Guyana’s share of revenues will not rise above the current 14.5/100 barrels – because of the lack of Ring Fencing.
I would urge President Ali to abandon his government’s firm ‘No Renegotiation’ policy. Replace it with Renegotiation Now. Hire qualified aides to articulate reasons for Renegotiation, not against renegotiation. The stuff Joel Bhagwandin, Randy Persaud and several anonymous SN bloggers write indicates they are working in the best interests of Exxon, not the State of Guyana. This nation must not sit back – and cooperate with Exxon – to cheat the nation of Fair Value for our oil resource. President Ali has urgent work to do – overhaul gov’t policy on Exxon. President Ali must take charge at some point. That time is now.
Sincerely,
Mike Persaud
