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Ramotar agreed for Guyana to repay Canje owners one percent royalty – In short, Guyana gets nothing
Former President and Minister of Petroleum, Donald Ramotar
Kaieteur News – There has been much discourse over the industry low two percent royalty Guyana is getting from ExxonMobil’s oil production in the Stabroek Block. However, the deal granted to the owner of the Canje Block owner pales in comparison. When former President and Minister of Petroleum, Donald Ramotar signed away the Canje Block on March 4, 2015, he not only agreed to a royalty rate of one percent, he also agreed that Guyana would repay every cent.
The fiscal terms of the contract denote that the funds gained from the sale of the oil or gas will be split 50/50 between the Contractor and the Government, after the Contractor recoups its investment. The royalty is what should have also been payable by the Contractor of a percentage of all oil and gas produced and sold.
In this contract, the royalty is being paid to the Guyana Revenue Authority (GRA) from the Government’s share of Profit Oil.
The Contract states at Article 15.6 “The Government’s share of Profit Oil… includes royalty payable by the Contractor at the rate of one percent (1%) of Crude Oil produced and sold, and delivery to the Minister… of his share of Profit Oil equivalent to royalty shall constitute payment of such royalty in kind.”
Hence, even though the owner(s) of the Canje Block will pay no royalty, the books will say that royalty has been paid. Effectively, Guyana gets no royalty from the production of oil or gas in the Canje Block.
Tullow Guyana and its partners, Eco-Atlantic and Total, benefit from a similar provision in the Orinduik Block agreement.
Former Minister of Natural Resources, Robert Persaud
This provision is just one of several, which severely diminish Guyana’s share of revenue from any possible production in the Canje Block, if oil is found, as royalty is one of the major revenue sources oil-producing nations depend on in the petroleum industry.The award, advised by former Natural Resources Minister Robert Persaud, was made to the local company, Mid-Atlantic Oil & Gas, of which Dr. Edris Kamal Dookie is the sole shareholder. JHI Associates (17.5 percent), ExxonMobil (Operator – 35 percent) and Total SE (35 percent) have since farmed into the block, and are all set to benefit from the effective royalty waiver.
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