Lopsided Exxon deal shackles Guyana to flawed Local Content Policy

May 04, 2020 News

By Kiana Wilburg

Natural Resources Minister,
Raphael Trotman

International Energy Lawyer, J. Jay Park, Q.C

The very moment before Natural Resources Minister, Raphael Trotman affixed his signature to that Exxon deal; did he really understand the value he would be leaving behind? Did he really review the contract page by page, for clauses that would leave local businesses at a disadvantage? Was he properly advised?
These are the questions that surface when one examines the real reason why Guyana would not be able to get the kind of Local Content Policy that receives an A+ grade from industry experts. It all goes back to the deal Guyana has with ExxonMobil and its partners, Hess Corporation and CNOOC/NEXEN. That deal was recently examined by one of the world’s most revered Energy Lawyers, J. Jay Park, Q. C, during an online discussion on Guyana’s fiscal regime for the petroleum sector.
Upon examining the local content provisions in the Exxon contract, Park said he would give it an F grade since the Operator has enough room to avoid giving first preference to Guyanese products and services.
In simpler terms, Park said that a local businessman can provide goods but the contractor, which is ExxonMobil, can simply say, “I can find it some other part of the world and get it at a lesser price.”
The lawyer continued, “And let’s say you do match or better all the prices in the entire solar system, the contractor can then say, ‘Sorry, I have found a better quality someplace else.’ Then you might say you can also find equal quality and sooner too. But even then, the contractor can say ‘Sorry, I need 10 times as much as what you have and I can get that at another source’.”
In other words, the Managing Partner of Petroleum Regimes Advisory and Park Energy Law said that the Stabroek Block deal is not a local preference clause. He said, “It is basically a clause that says ‘Yea, we will buy Guyanese goods that are competitive with everything else in the world and with every possible factor that can be used.”
The lawyer alluded to the fact that it would be virtually impossible for Guyanese businessmen to compete with the rest of the world for contracts in their own backyard.
PERFECT HARMONY

Energy Department, Dr. Mark Bynoe holding a copy of Guyana’s Local Content Policy.

Any Local Content Policy that Guyana pursues is inevitably shackled to being in perfect harmony with the poor provisions in the ExxonMobil deal.
The proverbial writings were already on the wall when Energy Department Head, Dr. Mark Bynoe had told the nation that due to “legal constraints” in Guyana’s Production Sharing Agreements (PSA), it was difficult to have certain provisions in the document.
This was just another way of saying that Guyana cannot get the policy it deserves, because the deal that was signed with ExxonMobil does not give the country and its people the leverage to do so. The provisions in the deal have actually reduced the power of the people and State.
Kaieteur News had reported that those provisions which could not be used called for the full disclosure of plans oil companies and their subcontractors submit to the government regarding their use of local goods, skills and services. Since those provisions were thrown into the waste basket, the policy now allows for the responsible Minister to release only a summary of the information received.
This is essentially what all of Guyana would have to accept as Dr. Bynoe had clarified that since the contract does not call for full disclosure, the policy cannot do otherwise. There has to be perfect harmony.

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