If ever a CoI is needed, the 2016 Production Agreement with Exxon demands one

Feb 08, 2020 Letters

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DEAR EDITOR,

If ever a Commission of Inquiry is needed, the 2016 Production Agreement with Exxon demands one. For the March 2020 election, all political parties must commit to this.
Global Witness is one of several international NGOs calling for an inquiry. More than three dozen local NGOs have demanded an inquiry. The majority of Guyanese want an inquiry.
When Global Witness tells Guyana we have a bad oil deal, that someone or some people signed away at least $US55B, they said nothing new. For several years now, the PPP and other independent voices have been saying so.
As Bharat Jagdeo stated, it could be a little less than US$55B, but it could be much more – in excess of US$70B. Incidentally, under pressure some months ago, unable to offer a proper defence, Raphael Trotman himself conceded that, in retrospect, it was a bad deal. The independent dailies have been relentless in exposing the giveaway.
Independent, experienced observers and industry experts agree Guyana got one of the worst deals in the history of the oil and gas industry, if not the worst oil deal ever.
Global Witness, an independent, British-Based NGO, concluded the team that negotiated the deal in 2016 did not represent the interests of Guyana.
The 1999 Janet Jagan Exxon Exploration license had expired in early 2016. That exploration contract merely allowed Exxon to prospect for oil. That license paved the way for the discovery of oil by May 2015.
By May 2015, the circumstances had dramatically changed. No longer was Guyana begging anyone to explore, Guyana was a sought-after oil destination. By the time 2016 came, Guyana was acclaimed one of the biggest new oil reserves in the world. Guyana had all the advantages on her side.
There were no provisions for automatic extension of the 1999 exploration license and Exxon was due to return 75% of the license prospecting territory. Exxon was in a weak negotiating position; Guyana had all the cards in her hands.
Instead, the Granger-led APNU+AFC not only hastily extended the 1999 terms, they renewed it with terms and conditions more favourable to Big Oil than when Guyana was begging for Big Oil to come. An illegal “bridging deed” was used, allowing Exxon to automatically have a new exploration licence and to move into a production licence. Without an investigation, we can only surmise and guess.
There was a reason the PPP signed only an exploration licence with Big Oil, with an expiry date. The PPP wanted to ensure that any generous terms and conditions intended to entice Big Oil to Guyana for exploration did not automatically extend into the production phase, should that ever materialise.
The use of the secret “bridging deed” by APNU+AFC was the first wrong. The generous conditions after that not only compounded the wrong, but transformed the wrong into something unholy. The $US18M signing bonus is an insult. For much less, Brazil got US$726M and Suriname for even much less got US$100M as a signing bonus.
The production agreement giving Guyana 2% royalty, when industry standards exceeded 7% and reached as much as 30%, seriously raises worrying questions beyond incompetence.
It is beyond reason to think Guyana’s negotiators were that stupid. It was APNU+AFC that boasted Trotman was the most suitable person to lead the negotiation, given he was a senior lawyer and had a month-long negotiation course at Harvard.
Trotman does belong to arguably the most incompetent Cabinet in Guyana’s history, but to accept 2% royalty when hundreds of such agreements reveal royalties of greater than 7% appears beyond anything imaginable.
Guyana has racked up pre-production cost of more than US$11B, a sum Guyana must refund to Exxon. This money will have to be taken out upfront from total revenues before any profit can be assigned to Guyana. Trotman agreed that Exxon could pay itself back from the first 75% of total annual revenues. This means that Guyana can expect no more than 12.5% of the profits for several years to come.
But then, incomprehensively, Guyana agreed to pay all income taxes and corporate taxes on behalf of Exxon from Guyana’s profits. Guyana’s expenses for monitoring operations also will come from our profits. In addition, Guyana is responsible for environmental control and clean-up, from our profits. This reduces our maximum profits to far less than 12.5% in the first few years. Truly, this is a brazen swindle.
Far from exposing APNU+AFC, Global Witness merely affirmed what the PPP, other independent voices and the three daily newspapers have been saying for several years. The dishonesty of APNU+AFC is that they knew any credible investigation would discover the inexplicable nature of this agreement. Long before Global Witness had completed its study, the Guyana Government knew what the results would be. They spent taxpayers’ money to hire another global company, since last September, to prepare a report to spin the Global Witness results they expected.
The expensive spin-doctors have not been able to soften the blow. The Guyanese people have been betrayed. An independent Commission of Inquiry is an imperative.
Dr. Leslie Ramsammy

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