Guyana's model oil contract should be rebuilt not renovated - PPP

Guyana’s model oil contract should be rebuilt not renovated – PPP

Oct 28, 2018 News

Opposition Leader, Bharrat Jagdeo

Members of the People’s Progressive Party (PPP) are of the firm belief that Guyana should completely do away with the model Production Sharing Agreement (PSA) that was used for companies like ExxonMobil and Tullow.
The party thinks that Guyana’s best option is to adopt a brand new model that is more advantageous to the nation.
Jagdeo holds this view. The former President spoke about this as he referenced comments made by head of the Department of Energy, Dr. Mark Bynoe, to the effect that the current model will be tweaked.
Guyana’s current model PSA is what was used as a mould for all oil contracts signed thus far. Though there are a few variations, it is generally accepted that none of the existing contracts are advantageous to Guyana.
Therefore, there was a call for the government to take steps to ensure that Guyana can secure more in the future.
During an interview with Kaieteur News, Dr. Bynoe said, “We currently have a PSA and it is what we used in the case of Exxon. As you would understand, we want to ensure we review that in its entirety because there will be things that will need tweaking. The idea is to have a model PSA which is more contextual to our current reality and where we are going.”
The official added, “That model PSA, once it is in place would be looked at by the Department (continuously) and it will be applied and tweaked where necessary.”
Jagdeo is totally against the move to “tweak.” He told the media, “That does not make sense.” Jagdeo recommended that Guyana rebuilds, from scratch, a model PSA. He said that best practices from around the world should be adopted to be included in the model.
PPP’s Charles Ramson also holds this view. He told Kaieteur News that Guyana finds itself giving away a lot already. “But that does not mean that it has to be the same in the future. We have an opportunity to change for the better.”
Ramson said that there are so many features that need to be included in a new model.
For instance, he said that there should be an institution of a resource rent tax. Such a tax forces companies profiting more than a certain amount a year to make further contributions to the government.
Further, Ramson said, “Our stabilization clause needs to either be removed from our PSA or to be changed all together. Currently, our stabilization clause is indefinite. In other PSAs around the world, the stabilization clause is for a time frame, either five or 10 years, and then it becomes null. Ours is in perpetuity.
“This means that for as long as the contract exists, we are stuck with the terms of that agreement.”
“And those are just two things off the top of my head that need to be addressed. There is much more. Indeed, I think we should start afresh,” said Ramson.
He said that in looking at it all over again, Guyana may find that Production Sharing Agreements “are not what we need at all.
We might find that Concessionary agreements may better serve us. The point is we have to look at all these things carefully. It is our future that we are playing with.”