Jagdeo condemns recovery of royalty in Tullow deal

Aug 19, 2019 News

…PPP will review because the benefit exceeds those granted to Exxon

Opposition Leader, Bharrat Jagdeo is adamant that Guyana should not have to pay the royalty it is owed by the contractors on the Orinduik Block.
Commenting last Thursday on the state of Guyana’s developing oil sector, Jagdeo drew attention to the fact that the contractor can recover the one percent royalty it is obligated to pay, on the Block.
“In the Tullow contract… the Government pays Tullow’s royalty.”
On this provision, he said “Exxon takes a lot of heat, but the Tullow contract is even worse.”
The Opposition Leader added that the repayment of royalty through recovery was a common feature, pre-discovery.
But at this juncture, he believes that it should not remain so.

Opposition Leader
Bharrat Jagdeo

Minister of Natural Resources, Raphael Trotman

“When [Ministry of Natural Resources, Raphael] Trotman signed the contract, in 2016, we had three billion barrels of proven reserve. One would think that the royalty would be, in addition to the profit oil we’re getting. As it is in the Exxon contract, it is in addition.”
The Opposition Leader has argued, on several occasions, that the poor contract terms written into oil contracts pre-2015, were handed out because Guyana did not have the prospects it does now. He has become critical of the Government, arguing that since there are billions of proven reserves, it should have advocated for much better terms when it signed the Orinduik PSA in 2016.
He said that, effectively, Guyana is “not getting royalty on top of profit oil” when production starts on that Block.
Should the People’s Progressive Party (PPP) win the next General Election, Jagdeo reminded that he has said “The PPP will review any other contract which has benefits that exceed those of Exxon or akin to those of Exxon in the future.”
“That position still remains today,” he added.
The recovery of the meager one percent royalty was recently exposed in a report prepared by Hannam and Partners (Advisory), a leading independent investment bank that provides advice and access to capital. The document, purported to list the reasons Eco-Atlantic – an operator on the Orinduik Block – is an attractive bet for investors.
The document noted that one of the most attractive provisions in the Orinduik PSA, for which Eco-Atlantic, has a 15% stake, is that the one percent payable to Government, “can be claimed back through cost oil”.
So far, the current stake distribution, as approved by the Government of Guyana, is Tullow – 60% (Operator), Total – 25% and Eco – 15%.
Qatar Petroleum recently bought a 10% stake from Total’s interest in the Block, but the farm-in is yet to be approved by Government.
Last week, Tullow announced that it struck oil on the Orinduik Block, on which it is the lead operator.
Tullow’s Chief Executive, Paul McDade, had noted that the discovery was made at the Jethro-1 well which could hold more than 100 million barrels of recoverable oil.

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