This oil contract is a giveaway of Guyana’s precious resources

Dec 31, 2019 Letters

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DEAR EDITOR,

Almost two years after the government signed the oil contract with ExxonMobil, it was made public, but only after months of constant pressure from this newspaper and other media outlets. From all indications, it was a poorly negotiated contract with a meagre two percent royalty, which is considered the worst of all negotiated oil contracts in the modern era. While it may not be too late to amend or improve the contract for Guyana to obtain a seven percent royalty which is the universal norm; the over-riding question remains unanswered: Why would the (former) Minister of Natural Resources with little or no experience in oil production or oil contract laws be allowed negotiate on behalf of the government with a multi-national giant such as ExxonMobil.

The simple fact that the Minister in question was given the green light to spearhead such a huge contract is both pathetic and heart breaking for the Guyanese people, many of whom believe that the revenue from oil would not be used to develop the country and uplift their lives but instead, will fill the pockets of government officials. Not only was the then Minister of Natural Resources clueless, but the signing of such an appalling contract proved that he was highly incompetent. It is unwise for the Minister to believe that he could negotiate one-on-one with the negotiators of one of the largest oil conglomerates in the world and expect to come out on top. Minister Trotman was definitely deficient in the basic principles of contract negotiations. My profession is based on contract negotiations and I could have assisted him in the six basic elements of contract negotiations which were probably lacking in his approach. They include:
1. Value: Ascertain the quantity and understand key attributes of your product and the prices of similar products in the market.
2. Negotiating Team: Competent persons with knowledge and expertise in the specific field.
3. Compensation: Know what similar product sells for and your bottom line
4. Benefits: What can be gained in the transaction?
5. Legal relationship: What specific performance is desired and in what timeframe?
6. Penalties for breach: Violation of terms of agreement must carry penalties for both sides.
There were countless examples of oil contracts worldwide for Guyana to follow and not make the same mistakes made by the African countries of Angola, Chad, Cameroon, Madagascar, Nigeria, Tanzania, Papua New Guinea, Mozambique, Zimbabwe, Equatorial New Guinea, and the Republic of Congo. These countries were all blessed with oil, but so far, none has been prosperous after years of oil production and sales. In fact, experts have claimed many are worse off today than before the discovery of oil in those countries by the oil conglomerates, including ExxonMobil, Shell, British Petroleum, among others. Except for the oil conglomerates, the present share values of the smaller companies are Tullow US$0.82, Eco- Atlantic US$0.60 and CGX US$0.46 on the NYSE. These are coined penny stocks on the New York Stock Exchange (NYSE).

Like those oil countries in Africa, there are some serious flaws in the oil contract Guyana signed with ExxonMobil. Guyana ignored the warning signs from these countries and negotiated a lopsided oil contract in favour of the oil companies because as some experts opined, either the government did not have the expertise or that it was grossly incompetent. The oil Production Sharing Agreement (PSA) without local content or “ring fencing” provision and the government’s failure to negotiate a substantial signing bonus and agreed for a meagre US$18 million, a two percent royalty and a 50 percent profit sharing after all of ExxonMobil expenses are discounted is a classic case of gross incompetence. And for the government chief negotiator, Mr. Trotman to wait for three years after the contract was signed before admitting that the Government could have signed a better contract with Exxon has not only made him look stupid, but it is also a gross insult to the people of Guyana who felt that there was more to the signing of such an awful contract than the eye can see. One thing is clear the President should have asked Trotman to resign.
That said, this is not the first time that governments have actually squandered the country’s natural resources for a pittance. During the last administration, the gold and mining industries were turned over to foreign companies; the lumber industry to Bai Shan Lin and the bauxite industry to Rusal and Bosai. It was an extortion that cost the people of Guyana hundreds of millions of dollars in lost revenue and huge profits for the multinationals.
The hastily establishment of the Energy Department headed by Dr. Mark Bynoe is yet another blunder in this comedy of errors. It is well known that Dr. Bynoe, an environmentalist, possesses scant knowledge of the oil industry in areas of production, sales and contract negotiations. Second, the recent agreement with Shell to market Guyana’s share of oil is questionable because the company is currently under investigation for alleged fraudulent practices. And as if the government has not insulted Guyanese enough, it has agreed to the requests of the oil companies that all foreign workers employed by the oil companies in Guyana be exempted from paying income tax if they are not physically present in country for more than 183 days. This led to a stinging rebuke from the International Monetary Fund (IMF) which has told the government that it must exercise its full taxing laws as a sovereign state. It is both regrettable and shameful that this government like the previous administration has allowed multinationals to continue the exploitation of Guyana’s natural resources and its people.

Leyland Chitlall Roopnaraine,
New York

EDITOR’S NOTE:
On numerous occasions Minister Raphael Trotman said publicly that he was instructed to sign the oil contract therefore he did not act independently.

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