No way would a Guyanese say Exxon deal is good - Dr. Hinds to Outgoing US Envoy

No way would a Guyanese say Exxon deal is good – Dr. Hinds to Outgoing US Envoy

Dec 13, 2018 News, What Guyana needs to know about ExxonMobil

When one merely considers the two percent royalty and the fact that Guyana has to pay ExxonMobil’s taxes out of its 50 percent share of the profit oil, there is no way a

WPA Executive Member, Dr. David Hinds

Guyanese would say that the contract with the USA oil firm is any good.
Those were the words of Executive Member of the Working People’s Alliance (WPA), Dr. David Hinds. His invited comment in this regard, comes on the heels of remarks made by Outgoing US Ambassador, Perry Holloway to the effect that Guyana got a “good deal” with ExxonMobil.
Dr. Hinds said that the citizenry should only see Holloway’s comments in the context that he is an American Ambassador, and as such, “he would put the most favourable spin on the contract.”
From the Guyanese perspective however, the University Professor said the picture is completely different. Dr. Hinds opined, “… You can never look at it (the contract) and say it is a good contract, and even the government that negotiated it would not be able to say that it is a good contract. And it is not for some objective reasons…”
In this regard, the WPA Executive Member reminded of the fact that Guyana has a very low take in terms of local content from the contract; that ExxonMobil has no cap on the equipment and materials it can bring into the country for the project; that the country was given an extremely low signing bonus; and the fact that Guyana has no right to do spontaneous audits as well as visit the operations, among other points.
He also reminded of the very short two-year deadline Guyana was given to do cost recovery audits on ExxonMobil, but the USA has nothing less than three years for similar audits in its oil sector.
Dr. Hinds was also critical of the government, saying that the negotiators for Guyana were clearly ill-prepared for the task ahead.

INT’L BODIES OPPOSE PSA
Several international bodies such as the International Monetary Fund (IMF), World Bank, Open Oil, the Natural Resource Governance Institute, and Chatham House, have been critical of Guyana’s oil deal with ExxonMobil.

Outgoing US Ambassador, Perry Holloway

The IMF has said in several reports that the Production Sharing Agreement Guyana has with ExxonMobil is fraught with opportunities for abuse. In fact, the IMF said that these very loopholes could result in a significant dent in the revenue that Guyana is supposed to get from the oil find by the operator.
The IMF has since recommended that Guyana hasten moves to revise the current framework of its PSA.
Specifically, the IMF said, “Introduce a revised production sharing mechanism for new PSAs that provide the government with a higher share of profit oil as the profitability of projects increase.”
In the agreement with ExxonMobil, Guyana gets 50 percent of the profit oil.
Going forward, the IMF said, too, that the government should apply tighter ring-fencing arrangements at the field level, including for the allocation of cost oil.
The IMF highlighted in no uncertain terms that this was missing from Guyana’s contract with ExxonMobil. The ring fencing provision ensures that an oil operator cannot transfer the expenses incurred at one well to another.
The IMF said that in principle, the ring-fencing arrangement ensures that the government’s revenue from the Stabroek Block is calculated based on each field or well separately.
The Fund stated, “However, this is undone by the Production Sharing Agreement framework, allowing the contractor to allocate cost oil to any field within the contract area.”