Govt. fails to negotiate signing bonuses with oil companies - “Even the ExxonMobil money is just a legal fund”- Ram

Govt. fails to negotiate signing bonuses with oil companies – “Even the ExxonMobil money is just a legal fund”- Ram

Mar 27, 2018 ExxonMobil, News

Chartered Accountant, Chris Ram

Guyana has not been able to secure signing bonuses on any of Petroleum Sharing Agreements (PSA) that the governments signed with oil companies, except for ExxonMobil.
Guyana has standing PSAs with several oil companies including Ratio Energy Limited, CGX Energy Inc, Eco- Atlantic and Tullow Oil. The only “signing bonus” received so far is from ExxonMobil and critics say that the US$18M received under that name is “chicken feed” to the money given to other countries.
Even further, Attorney at Law Christopher Ram is saying that the US$18M is not even a signing bonus. “The ExxonMobil money is not a signing bonus it is a legal fund; they have admitted that themselves. So in truth, Guyana has not received any signing bonus from any of the companies.”
Yesterday, Ram told Kaieteur News that he believes the reason Guyana missed out on signing bonuses is that the persons who may have negotiated the contracts at various times were not aware of all the elements that go into the fiscal regime of a petroleum contract.
He said, “Lots of contracts also have a production bonus; so on first production, the companies pay a bonus as well.”
There are also cases where countries get discovery bonuses.
Just one year after Guyana surreptitiously accepted US$18M from ExxonMobil as a “signing bonus,” the same company handed Brazil a US$700M bonus.
This reality raised many questions in the minds of cynics who worry that Guyana is going down a very bad road, one from which the nation might not be able to recover.
In the oil industry, signature bonuses are given to countries after the completion of a Production Sharing Contract (PSC) with an oil company. In many cases, the PSC prescribes the quantum of the bonus or how it is supposed to be paid.
For example, the Nigerian PSC contains signature and production bonuses. This bonus is a fixed fee which is paid by the oil company to the Nigerian government at different stages of the project. Signature bonuses are paid immediately after the completion of negotiations and signing of the PSC while production bonuses are paid when the production from a specific contract area reaches a particular threshold.
The signing bonus has nothing to do with whether a country is going for first oil or if it has been producing oil for ages, it is all about the negotiation. Of course, negotiations are made based on strengths and weaknesses. Without a doubt, the fact that ExxonMobil has already estimated over one billion barrels of oil in the Liza field alone is a major strength of Guyana.