PSC wants Govt. to hire better negotiators for future oil contracts

Jan 07, 2018 News

The Private Sector Commission (PSC) of Guyana made a recent call for the Government of Guyana to hire better negotiators for future contracts. The Commission made this call after a detailed review of the Petroleum Agreement between ExxonMobil, Hess Corporation and China National Offshore Oil Corporation (CNOOC) and the Government.

The Commission said that while it believes that the disclosure of the Agreement bodes well for a transparent and accountable oil and gas industry, several concerns rise to the surface.

As an initial commentary, it is the opinion of the PSC that much more could have been done to incorporate more local content provisions into the agreement. In addition, the Commission said it expected greater benefits would have accrued to local businesses as a result of the agreement.

The Commission also made reference to the findings made by the International Monetary Fund (IMF) in relation to the agreement. The IMF had highlighted that there were no provisions in the contract regarding ring-fencing.

This principle ensures that ExxonMobil is unable to transfer expenses from one well to another. As a result of this, the Commission noted that Guyana will be left to bear the costs of unsuccessful exploration.

A matter of great interest to the Commission is the fact that given the early stage of development, Guyana does not have the right to re-negotiate the terms of the Agreement.

The PSC noted that this is specified in Article 32 of the Agreement’s Stability Clause.

The Commission said, “We are concerned, since this Agreement encompasses the entire Stabroek Block, an area of 6.6 million acres of water with 3.2 billion barrels of equivalent oil so far. With the projected massive oil discoveries, we believe that there should be increased flexibility given to the Government of Guyana, to ensure a fair and equitable deal on both sides.

At present, the cost of energy is the primary limitation to the expansion of business and growth in Guyana. There is nothing in the Agreement to indicate that with Guyana owning such large oil reserves, this would translate into reduction of the costs of energy to Guyanese.”

The Commission continued, “The business sector and general populace of Guyana deserve to benefit directly from the abundance of oil at its disposal and we look forward to seeing future Agreements for other blocks offshore include provisions with greater benefits to Guyana and its people.”

The body added, “We also expect that for all other blocks offshore, the Agreements with operators/contractors will consist of provisions that will ensure Guyana receives more royalty, rents, training and development for Guyanese and better local benefits for all Guyanese through the enlisting of the services of world class negotiators who can competently negotiate with major oil companies.”