Exxon’s PSA includes special account for payments

Dec 06, 2019 News

By Gary Eleazar

Esso Exploration and Production Guyana Limited (EEPGL)—ExxonMobil Guyana—has a special arrangement in its Production Sharing Agreement (PSA) with the Guyana Government but officials insist that all of the payments have been accounted for.
Under the PSA inked with another operator, CGX Energy Inc, in February 2013, that company would pay to the regulating body—the Guyana Geology and Mines Commission (GGMC)—an annual rental of US$100,000 for its contract area.
Ratio Energy Ltd which inked its PSA with Government in April 2015, also agreed to pay a rental fee of US$200,000 annually for its contract area.
That rental is being paid, according to the PSA, to the GGMC. The same obtains for Tullow and Eco Atlantic, a joint venture.
That Joint Venture inked a PSA on January 14, 2016, and agreed to pay US$40,000 annually for its contract area.
ExxonMobil Guyana—EEPGL and its partners Hess Corporation and CNOOC—was charged a higher rental of US$1M for its contract area which runs the length of Guyana’s coast with the Atlantic Ocean—bordered by Venezuela to the West and Suriname to the East.
That PSA however, dictates that the payment be made directly into accounts controlled by the Government of Guyana, and that the “Contractor (ExxonMobil Guyana) shall verify such bank accounts and the Minister agrees to cooperate, assist and provide the Contractor with any information it requires to conduct such verification.”
The definitions in Article I of the PSA defines government as the “government and its ministries and agencies.”
Each of the other PSAs identifies GGMC as the body to conduct verifications or provide account information.
Then Minister with responsibility for the Energy Sector, Raphael Trotman, in an invited comment yesterday, said that the reason for the change in arrangements had to do with the fact that it was a new regime in the way business was being conducted.
He sought to assure, however, that the Ministry does not control the money but rather, despite the PSA provisions, the monies are paid to and held by GGMC.
GGMC Commissioner, Newell Dennison, told Kaieteur News that rentals from all of the oil companies are indeed paid to the GGMC.
He told Kaieteur News that GGMC in its expenditure of its resources does not differentiate between its sources of income but rather all revenue streams are accounted for and consolidated.
As such, he could not say what, if any, specific programmes were funded using the revenues earned from its offshore rental.
The payment by the ExxonMobil and other oil companies with concessions in Guyana’s Exclusive Economic Zone (EEZ) is monies paid to Guyana separate from royalty and profit oil to be earned from its offshore operations.
Companies are also required to pay to the Ministry an annual amount to be used for Corporate Social Projects (CSP) payments.
Government is yet to say what this has been earmarked for specifically.
ExxonMobil in its PSA had also committed to providing the Ministry of the Presidency (MotP) with US$300,000 each calendar year, for the Department of Energy (DoE).
Department of Energy Director, Dr. Mark Bynoe, had confirmed the existence of the money and payments made and that it was still to be utilized.
Under Article 28 of the PSA which deals with Social Responsibility and Protection of the Environment, “The Contactor shall directly fund” the amount of US$300,000 per calendar year with any funded but unspent portion of the amount being carried over to ensuing years.
Article 28.7 of the PSA stipulates that the Minister and the contractor shall meet annually to agree which projects shall be funded in a year.
Asked to provide an update on the state of the account, the Energy Department Head said he would be unable to, since this was an account set up by the Ministry.

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