In light of recent political developments... Govt., ExxonMobil should not sign crude lifting agreement - IMF

In light of recent political developments… Govt., ExxonMobil should not sign crude lifting agreement – IMF

Sep 27, 2019 News

By Kiana Wilburg

The ruling by the Caribbean Court of Justice (CCJ) that the political Opposition’s No-Confidence Motion was successfully passed on December 2, 2018 has triggered the need for a General and Regional Elections. In light of this, and the political developments that ensued, the International Monetary Fund (IMF) has advised that the Government of Guyana not to sign any agreement with Stabroek Block operator, ExxonMobil, for crude lifting.
The Fund is of the firm conviction that the political developments have introduced uncertainty into the government’s abili

Petroleum Advisor to the Govt., Matthew Wilks

ty to enter contracts. As such, it stressed that the agreement should not be signed before the next elections. It noted that the Crude Lifting Agreement (CLA) is crucial since it would impact the pricing of crude oil and the sales price that the government may realise.
In such a situation, it noted that an interim lifting policy should be approved.
The IMF was also keen to note that the CLA which is being negotiated between the government and ExxonMobil was not available for review. Be that as it may, it said that such a document is expected to state that the volume of crude oil at each lifting will be determined by an independent inspector that is paid for by the lifter. The IMF said it should also state that the government has the right, along with Exxon, to witness the taking of measurements before, during and after loading.
It was in May last, that Petroleum Advisor to Government, Matthew Wilks, had revealed that an agreement is being worked on to ensure the accountable measuring of Guyana’s crude.
Wilks had said that the agreement contains all the necessary metering checks and that document is in an advanced stage of preparation. In May as well, he had said that Guyana was looking for a Crude Lifting Advisor.
Asked to say if the document will be made public, Wilks had said, “There is not an issue to making it public. We are quite happy to make it public.”
KAIETEUR EXPOSES
It was in February of this year that Kaieteur News had exposed the Production Sharing Agreement Guyana has with ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), CNOOC and Hess, has no provision in place which speaks to the country’s right to verify the operator’s oil production.
Other nations like Trinidad and Tobago, for example, have rigid rules, agreements and regulations in place on this matter.
With respect to its PSAs with oil firms, Trinidad has an entire section on Measurement.
Provisions 19.1 and 19.2 under that Section say, “All Petroleum produced, saved and not used in Petroleum Operations shall be measured at the Measurement Points approved in the Development Plan. The Measurement Point shall be at the end of the facilities for which the cost is included as a recoverable cost of Petroleum Operations under the Contract.”
At provision 19.3 it adds, “The Production shall be measured in accordance with the sound and current practices and standards generally accepted in the international Petroleum industry. All measurement equipment shall be installed, maintained and operated by Contractor.
“The Minister shall have the right to inspect the measuring equipment installed by Contractor and all charts and other measurement or test data at all reasonable times. The accuracy of Contractor’s measuring equipment shall be verified by tests at regular intervals and upon the request of the Minister, using sound and current means and methods generally accepted in the international Petroleum industry.”
Upon discovery of a meter malfunction, Trinidad’s PSAs make it clear that the contractor shall immediately have the meter repaired, adjusted and corrected and following such repairs, adjustment or correction shall have it tested or calibrated to establish its accuracy. Upon the discovery of a metering error, the nation also requires that the contractor have the meter tested immediately and the necessary steps taken to correct any error that may be discovered.
In the event a measuring error is discovered, the nation sets out in its PSAs that the Contractor shall use its best efforts to determine the correct production figures for the period during which there was a measuring error, and that the corrected figures shall be used. In determining the correction, the nation notes in its oil deals that the Contractor shall use, where required, the information from other measurements made inside or outside the Production Area.
The oil contractor signed to a PSA is also required to submit for the Minister’s approval, a report detailing the source and nature of the measuring error and the corrections to be applied.
If it proves impossible to determine when the measuring error first occurred, PSAs noted that the commencement of the error shall be deemed to be that point in time halfway between the date of the last previous test and the date on which the existence of the measuring error was first discovered.