It is deceitful for ExxonMobil to compare 1999 contract with 2016

Aug 15, 2018 ExxonMobil, News

…Guyana did not get a good deal – Research Centre Director

ExxonMobil has been unceasing in its efforts to delude the international community and even the citizenry into thinking that Guyana got a good deal. In fact, the company took to its Facebook page recently and made a comparison between the 1999 agreement and the one that was revised in 2016 by the David Granger-led administration.
In its comparison, Exxon points out that Guyana did not get a signing bonus in 1999, but it did in 2017. In 1999, the annual rental fee was US$240,000 but it was increased to US$1M per year in the 2016 contract.
It noted that the annual training fee was US$45,000 but it was increased to US$300,000 per year. It also tried to paint the contract as a “good deal” by stating that Guyana will get annual social environmental support to the tune of US$300,000 and two percent royalty.

Chartered Accountant, Chris Ram

Lisa Sachs, Director at Columbia Center on Sustainable

In a recent interview on AlJazeera, (http://stream.aljazeera.com/story/201807302226-0025687), Oil and Gas Academic, Chris Ram and Lisa Sachs, Director, Columbia Center on Sustainable Investment, agreed that not only is the comparison by ExxonMobil without merit but, that the 2016 oil and gas deal leaves Guyana catching crumby profits for the exploitation of its oil.
Sachs in particular was quick to note that the circumstances have changed entirely from 1999 to 2016. As such, the two should not be compared. In 1999, she said, there was a period of exploration and it was unknown what the quality of the resource was. In 2016, the citizenry now knows what it has, Sachs stated.
“And so it is disingenuous of Exxon, frankly, to be making that comparison. What we should be looking at is whether the deal in 2016 is appropriate for the Government, and it is widely agreed and widely acknowledged that it is not. Guyana did not get a good deal. I would say, although somewhat controversial, I wouldn’t be afraid of having an honest conversation about whether this is a good deal and talking about how to rebalance the deal.”
Sachs added, “Investors and frankly the media always make governments scared of approaching that, but there are dozens, hundreds of renegotiations in the resource sector around the world, in developed countries, in the UK, in Canada, etc…”
Ram was in total agreement with Sachs. He also sought to clarify statements by ExxonMobil that it could have continued with the 1999 agreement, but it was government that requested to do an early review. Ram said that the public should be aware that ExxonMobil and its partners had no choice but to return to the table since the contract had expired.
Ram pointed out, too, that while ExxonMobil is busy trying to hoodwink the nation into believing that it gave Guyana a good deal, it fails to reveal that it inserted US$460M in pre-contract costs into the deal which upon examination, seems inflated.
PRE-CONTRACT COSTS
Ram was one of the concerned citizens who called for the US$460M pre-contract costs to be audited. Based on his examination, he said that the numbers were not adding up.
Ram in his writings noted that ExxonMobil is represented by three companies as the contractor for the Stabroek Block: Esso, CNOOC and Hess. Using the financial statements of Esso and CNOOC, the only ones, which were publicly available, he pointed out a few important things.
Ram highlighted, for example, that the combined expenditure of Esso and CNOOC at December 31, 2015 was $26B with reported losses of $21B, giving a total of $47B. In United States dollars, using a $200 rate, Ram said that this gives a total US$245 million, well short of the $460 million that the Government accepted in the agreement with ExxonMobil.
To make up the total of US$460 million, Ram said that Hess alone would have had to spend, in contract costs, some US$215 million or approximately $46B, which he opined would defy logic.
Ram stressed that the only satisfactory and acceptable resolution of this matter is a special audit being independently undertaken.

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