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Guyana-Exxon PSA definitely in bottom pile of worse contracts – Consultants
By Kiana Wilburg
In light of all the feedback received from numerous oil and gas experts, international organisations such as the Inter-American Development Bank
Oil and Gas Consultant, Dr. Jan Mangal
(IDB), the International Monetary Fund (IMF), and from his own knowledge, Petroleum Consultant, Dr. Jan Mangal is of the firm view that Guyana’s oil deal with ExxonMobil for the Stabroek Block is definitely in the bottom pile of some of the world’s worst contracts.
During an exclusive interview with this newspaper recently, the former Presidential Advisor noted that Guyana’s contracts are from the colonial era. But what is of significance, he said, is the fact that Guyana is being “re-colonised.” The transparency advocate asserted that the nation’s leaders in politics and some businesses are being used as the local army for the colonisers. Dr. Mangal said that this is a common strategy of colonisers and exploiters, which is, to create local agents to subdue and control the local population.
In other words, Dr. Mangal said that the concept can be surmised as, “Make a few local business people and politicians rich from oil so they will work for the exploiters and so they will not work for their country folk…”
Also sharing similar sentiments that Guyana’s PSA with Exxon does stand out among some of the worst was University of Houston Instructor, Tom Mitro.
In his over 30 years experience in the industry, Mitro said he has never come across a PSA with more troubling provisions than those contained in the Guyana-ExxonMobil deal. The Oil Consultant who is versed in contract renegotiation posited that one may see isolated cases where one or two of the odd clauses are present in other contracts.“But so many, (that is to say, 13 unusual provisions) all in the same
University of Houston Instructor, Tom Mitro
agreement is unheard for me,” the University of Houston Instructor stated.
Mitro added, “Normally, the only time you see a PSA with highly favourable terms for the companies is in a province where there has been no exploration done or where they have only had dry holes in the past. And even then, the PSA is usually not as favourable as the one for Exxon and its partners operating in Guyana.”
Based on the dozens of contracts he has reviewed, Mitro said that undoubtedly, the Guyana-Exxon PSA stands out as the worst.
EXTENSIVE REVIEW
On Sunday last, this newspaper published one of its investigative pieces, which examined Guyana’s PSA with ExxonMobil against that of others.
It turns out that out of over 120 PSAs this newspaper examined, Guyana’s is in a class of its own. It is the only one, which has more than a dozen odd provisions all in one place.
For example, the PSA sees the government paying the contractor’s income tax out of the country’s share of the profits. However, none of the 130 PSAs examined show this arrangement. Further, Guyana’s PSA is the only one out of 130, which has very moderate work obligations for contractors who are vested with offshore licences.
Additionally, the Guyana-ExxonMobil PSA is the only one out of 130 contracts, which has no ring-fencing provisions to prevent costs of unsuccessful wells being carried over to that of successful wells. There is also no sliding scale for royalty to increase as production improves.
And that is not all. Guyana’s PSA is the only one out of 130 that allows insurance premiums to be fully recovered as well as interest on loans and financing costs that are incurred by the contractors.
The 130 PSAs examined are part of a register on www.resourcecontracts.org. (https://resourcecontracts.org/search?q=Production+Sharing+Agreement+) That website offers over 620 PSAs from around the world for perusal.
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