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Exxon/Guyana contract…Lack of transparency a source of concern – Expert
By Suraj Narine
Whilst the David Granger-led administration is sending the right signals to potential investors and industry players to come to Guyana and explore, the issue of transparency is a cause of concern.
Control Risks’ Senior Analyst Raul Gallegos (left) and Craig Kelly, Director of the Americas in Int’l Government Relations at ExxonMobil.
This is according to Control Risks’ Senior Analyst for the Andean Region, Raul Gallegos.
Gallegos made this assertion on Thursday during Day Two of the XXVI La Jolla Energy Conference in San Diego, California USA. He said that the government is not transparent about publicly sharing the Profit-Sharing Agreement (PSA) that it has with ExxonMobil.
“That is something that is keeping us a little bit concerned. This level of obscurity.”
A PSA is usually signed between governments and companies involved in resource extraction to determine how much of that resource the parties will receive.
The government is yet to make the contract public.
Minister of Natural Resources, Raphael Trotman, told this publication back in March this year, that the contract applies to the entire Stabroek Block – where Exxon and its partners are exploring offshore Guyana. He had stated, also, that government is reviewing the contract in order to update it so that any future arrangement will be contemporary with what is prevailing in the industry. This process, he said, is being done by both local and foreign experts.
The Minister informed that the contract which was signed in 1999 has essentially maintained its original form.
“We inherited the contract from the former government. Government took the decision to look at, but avoided reopening the contract in its entirety for negotiations. We didn’t want it to go abroad that Guyana was a place where we didn’t respect the sanctity of contracts entered into, and we thought it best to preserve what we had found, it was not altogether a bad contract,” Trotman has said.
Little is also being said about how the profits will be shared. The latest update in the local media states that 75 percent of the oil production will go towards ExxonMobil’s cost of investment and operations and the remaining 25 percent of profit oil would be split equally between the state and the company.
Sending the right signal
Gallegos informed the attendees that the discovery made offshore Guyana is a “big bounty” especially for a country that has an estimated population of just 800,000.
“The good news is certainly, the government is sending the right signals as far as creating a reality for companies to come and explore, certainly the Guyana government is sending that signal quite strong. The problem we’re seeing is obviously the issue of transparency.” He said.
The Analyst said that for the past few months, he and his team spent a considerable about of time “catching up” a little on what the Guyana Government plans to do with the revenues from the oil sector. Gallegos said that it is still unclear what the plans are.
He expressed concern over Guyana’s history of weak institutions and the state’s ability to regulate laws to govern the sector.
“There is an element of how this massive flow of riches will certainly affect the political dynamic in this country.” Gallegos said.
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