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With its massive oil reserves…Guyana has more than enough leverage to renegotiate deal with Exxon – former TT Minister
“If the regime that has been agreed to is oppressive to the government…then clearly now is the time to renegotiate. No investor is going to turn their backs on a commercially profitable arrangement. They are here to make money…” – Former TT Minister Vasant Bharath
By Kiana Wilburg
The larger the oil find potential, the more leverage a country has to renegotiate contracts believed to be oppressive.
According to Former Minister of Trade, Industry, Investment and Communications in Trinidad and Tobago, Vasant Bharath, this principle stands true in the case of Guyana.
He made these and other comments during an exclusive interview with Kaieteur News in Trinidad and Tobago. The discussion focused on recent statements by his Prime Minister, Dr. Keith Rowley. At an Energy Conference organized by TT’s Energy Chamber, Dr. Rowley had noted that moves to renegotiate oil deals with companies that were enjoying the lion’s share of his country’s resources were proving to be successful.
Given TT’s success thus far, Bharath was asked to say if Guyana should pursue the same route, especially since some deem the contract it has with ExxonMobil to be lopsided.
TT’s Former Minister of Trade, Industry, Investment and Communications, Vasant Bharath
Bharath said, “If the regime that has been agreed to is oppressive to the government as it has been deemed to be for the government of Trinidad and Tobago, then clearly now is the time to renegotiate. No investor is going to turn their backs on a commercially profitable arrangement. They are here to make money…particularly in light of the oil Guyana is finding, for both Exxon and whoever else, it comes down to dollars and cents, what they can lift it out for and sell it for…
“Let’s assume that like TT, Guyana believes it is getting the short end of the stick, I think the oil companies would be prepared to renegotiate on the basis that in other countries, they may not be earning even half of what they are earning in Guyana. So if they gave up some of it, they would still be earning a lot more in terms of the return on the investments they are earning in other places…”
He added, “With that information, you have the ability to go back to the table and say this has to be a mutually beneficial situation… And we don’t want a situation, which sees you (the oil firm) creaming off all of the profits and we are left with just the dregs and the Guyanese people are not going to benefit from their own resources…”
Just last year, ExxonMobil noted that it has an “aggressive growth strategy”, which will see its earnings and cash flow from operations more than doubling. The 100 percent increase is expected to be achieved by 2025 with Guyana being central to that process. (See link for full story: https://www.kaieteurnewsonline.com/2018/05/21/guyana-is-key-to-exxonmobils-plan-to-double-company-earnings-by-2025/)
Bharath also spoke of the recent oil finds by ExxonMobil in the Stabroek Block. Earlier this month, Director of Energy, Dr. Mark Bynoe, announced that ExxonMobil’s 11th and 12th discoveries offshore Guyana were made at the Tilapia-1 and Haimara-1 wells in the southwest section of the Stabroek Block. While the appraisals are not complete, it is expected to push oil production figures much closer to the one million mark. There are fewer than 11 countries producing one million barrels of oil per day.
With such promising prospects, the Coalition Government is still refusing to renegotiate the two percent royalty and 50/50 split that it accepted from ExxonMobil during negotiations on the contract in 2016. At that time, Guyana was pegged to produce about 100, 000 barrels of oil per day.
Taking the aforementioned points into consideration, Bharath said that Guyana has more than enough leverage to call for renegotiation. The former TT Minister noted that TT is producing 66,000 barrels of oil per day and renegotiation is taking place. The Trinidadian emphasized, “…Just remember, the larger the potential, the more leverage you have for demanding more…”
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