COMMENT

Feb 09, 2018 News

Renegotiate this lopsided agreement

Esso (Exxon) had a contract with the Government of Guyana which was signed on June 14, 1999. They breached that Agreement, claiming spuriously, force majeure, as a result of the aggressive action by Suriname against CGX.
This spuriousness is validated in the Memorandum dated April 15, 2016 written by the Geology and Mines Commissioner, Newell Dennison, to Minister of Natural Resources Raphael Trotman, following a meeting Dennison and his Deputy had with Esso in Texas.
Mr. Dennison wrote: “Esso then confronted with GGMC the matter of their Contract and Licence. This was anticipated some years prior when it was obvious that in the remainder of the licence term, all the exploration work to be done could not be achieved.”
To put this in context, Esso (Exxon) took more acreage than the Guyana law allowed. And it could not explore the six hundred blocks – the very reason why the law prescribed a limit to the number of blocks an applicant can be awarded to sixty. But it was cheap and profitable to their balance sheet to hold on to these assets. So hold on they did.
But then they ran into another problem – the expiry of the licence. So what did they do? Esso (Exxon) then confronted GGMC with the matter of their Contract and Licence. Reporting on the encounter, the GGMC team noted that “Esso was very uncomfortable with a transition.”
Despite the statutory deadline and the expiry of the Blocks, Esso (Exxon) demanded a new Agreement and a new Prospecting Licence. In so doing, they have created a precedent for renegotiation. This precedent cannot only work in their favour. It must also work in favour of Guyana.
This 2016 contract, a product of Exxon’s demand for a new agreement, is lopsided. The 1999 Agreement contained a Stability of Agreement Article which Esso (Exxon) ignored because it was convenient for them to do so. It cannot work this way – Esso cannot have, as we say in Guyana, cake and bake, or eat their cake and have it.
Renegotiation must be available where circumstances so warrant. Sovereign states must be able to make and unmake laws for the benefit of their people. This has happened in almost every petroleum country, including Norway.
Guyana needs to insist on a renegotiation of this contract.

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