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A HORRIBLE CONTRACT

Feb 23, 2018 Editorial, Features / Columnists

The oil contract with Exxon was made public last December after constant pressure from all quarters to release it. It has since been dissected by the experts and found to have numerous glaring loopholes that put Guyana at a serious disadvantage. Those with the knowledge have described it as the worst ever contract of its kind.
Long before the contract was released to the public, thorough research on the operations of ExxonMobil in more than 20 countries revealed that those countries are worse off today after the US oil giant left their shores. Guyana will not be an exception. In fact, Guyana is saddled with a lopsided contract.
It is clear that the coalition government did not put the interest of the country first when it negotiated the contract. It is an oppressive contract which could spell disaster for the country. If this contract is not rescinded or renegotiated, ExxonMobil could plunder our oil and gas resources. It is the worse form of exploitation in the modern era.
The government, though it may not want to admit it, should have sought professional advice from experts with the skills, knowledge and experience in the oil and gas industries. But as often reported, this government is wasting millions of dollars paying advisers but do not seek their advice. It has negotiated the contract with ExxonMobil, knowing full well that it has no experience and very little or no expertise in the field. In many respects, the 2016 contract has exhibited these deficiencies.
The truth is, the government entered the negotiations woefully unprepared. The level of incompetency and apparent indifference portrayed is unbelievable.
Among the concerns in the contract are the two percent royalty that is inexplicable in relation to world standards, the meagre US$18 million signing bonus, prohibition on increases in taxes and duties even if local laws are changed, and unannounced visits to ExxonMobil offshore operations being prohibited.
In addition, the government has committed to repay Exxon-Mobil US$460M for its pre-contract operations and the cost for litigation of any sort brought against the company during its operations in Guyana. Again this is incomprehensible. Despite these concerns, the government continues to maintain that it snatched the best deal in the negotiation with ExxonMobil. And some in the government have displayed their arrogance and inanity by telling us that ExxonMobil went out of its way for Guyana, and that we should show gratitude to the company.
With an estimated value of US$370 billion, 75,000 employees and about 2.5 million individual shareholders, ExxonMobil is a rich and powerful multinational company. It has more wealth than most of the underdeveloped countries, including Guyana. And while the company obviously has an obligation to its shareholders to make significant profits, this country’s government has a responsibility to represent the best interest of its citizens, but the latter has failed. The government has negotiated a rotten deal with little benefits for the country and its people.
Even though the general conclusion is that the contract is flawed, the Minister of Natural Resources and by extension the government, have refused to acknowledge this and would probably not want to or be able to convince ExxonMobil to renegotiate it.
It is difficult for the public to accept that a government with so many serious and educated personnel would even attempt to compare the oil contract it signed with ExxonMobil in 2016 to the Canadian Oil and Gas Company (CGX) contract signed by former President Ramotar in 2013, when oil was a mere dream. It is absurd and naïve for the current government not to know that the oil contract it signed with ExxonMobil in 2016 was after it was confirmed that oil was found in large quantities in the Stabroek block. Plain and simple, it is a lame excuse. A horrible contract has been signed.

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