Oil & Gas contract renegotiations are a must!

Feb 05, 2020 Letters

DEAR EDITOR,

Based on the findings of Global Witness and the recommendations of the IMF and Industry Experts, CRG is left with no other choice but to support the full renegotiation of the oil & gas contracts currently in place. CRG also fully supports the key recommendations of the Global Witness report which are the following:
1. Renegotiate Exxon’s Stabroek license to get the revenues Guyana needs to build a strong economy following the country’s Green State Development Strategy.
2. Ban all drilling and extraction in areas other than the 15 discoveries Exxon has made to help fight the climate emergency.
3. Investigate the process by which the Stabroek license was negotiated.
4. Investigate officials and companies involved in the Kaieteur and Canje licenses to determine if there were any irregularities in the awarding of those blocks.
For this reason CRG is also calling on a moratorium on the drilling of new wells prior to the renegotiation of the oil contracts. In addition, a Commission of Inquiry (COI) that is manned by an external independent and transparent body should be initiated as soon as possible into the process & people involved in the contract negotiations that have led to the one sided deals given to our country.
As for the terms of the new contract, the appropriate benchmarks should be taken to ensure the minimum terms for the contract are clearly established. Whether it is:
a) a change in the legal jurisdiction to the CCJ,
b) a 20% to 25% royalty payment,
c) a gross margin sharing agreement with a 70% minimum in favour of Guyana,
d) ring fencing of wells,
e) a cap on production expenses,
f) an inclusion of decommissioning costs in operating expenses,
g) ExxonMobil’s full ownership of interest expenses & financing costs,
h) an environmental commitment (ongoing project liability) that is a percentage of output or based on worst case scenarios for potential environmental damage.
These are just a few examples of the contract elements that should be benchmarked to facilitate the renegotiation process.
It is also the position of CRG that a multi party & multi discipline body should be involved in soliciting the US State Department’s support for the COI and ultimately the reopening of contract renegotiations. CRG is also convinced that prior to further sale of our oil & gas it is in Guyana’s best interest to better prepare for the Industry’s disposal of byproduct waste which is substantial (approximately 13 times the level of production) during the production process. The issue of our gas resources also needs to be clearly addressed before further production is authorized.
In the pursuit of national growth and individual prosperity our leaders must keep in mind that by ensuring proper preparation they will also ensure better long term prospects for their prosperity if it is well aligned with the objective of sustainable long term prosperity of Our Nation. Failure to prepare is preparing to fail.

Best regards,
Mr. Jamil Changlee
Chairman
The Cooperative Republican of Guyana (CRG)

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