Stabroek Block deal reviewed but lopsided provisions untouched - Jagdeo confirms

Stabroek Block deal reviewed but lopsided provisions untouched – Jagdeo confirms

Jan 15, 2021 News

– Says other mechanisms will be used to get more benefits for Guyanese

By Kiana Wilburg

Vice President, Dr. Bharrat Jagdeo.

Kaieteur News – Even though the Stabroek Block Production Sharing Agreement (PSA) contains several weak provisions and has been reviewed by the People’s Progressive Party (PPP/C) administration, Vice President, Dr. Bharrat Jagdeo made it pellucid that all provisions have and will remain intact.
During a brief interview with this newspaper last night, Jagdeo said what the government is doing instead, is using the review process as the platform for developing mechanisms that will bring Guyanese more benefits. He said this is the reason why a local content policy and a gas-to-shore project are being produced.
The Vice President said, “We are looking at several areas. Remember we promised to review all of the contracts and to see where we can get more benefits for Guyanese. As part of that review, we have committed to having a new PSA for all of the future contracts so that means going forward, every person including those who have licences already, will when they come to production stage, have an entirely different contract than the one for Stabroek which will include significantly more benefits.”
The official reminded of the commitment, which the government made to ensure that as part of the review, it would not be renegotiating the ExxonMobil deal but rather, look at ways to get more benefits.
“That is why we are looking to get the local content out of the way and that is why for the gas to energy project, we made it clear that a significant part of the gas will have to come as free or way below market value. We believe that through those mechanisms and others, like the strengthening of license for the Payara project…our people stand to benefit much more than under the existing contract and the way it was,” the Vice President.
Kaieteur News would have exposed via an extensive study published in 2019 that Guyana’s PSA for the Stabroek Block has some of the world’s worst provisions when compared to 130 other deals.
For example, the PSA says sees the government paying the contractor’s income tax out of the country’s share of the profits. However, none of the 130 PSAs examined shows this arrangement.
Further, Guyana’s PSA is the only one out of 130, which has very moderate work obligations for contractors who are vested with offshore licenses.
Additionally, the Guyana-ExxonMobil PSA is the only one out of 130 contracts, which has no ring-fencing provisions to prevent costs of unsuccessful wells being carried over to that of successful wells.
There is also no sliding scale for royalty to increase as production improves.
And that is not all. Guyana’s PSA is the only one out of 130 that allows insurance premiums to be fully recovered as well as interest on loans and financing costs that are incurred by the contractors.
The 130 PSAs examined are part of a register on www.resourcecontracts.org. (https://resourcecontracts.org/search?q=Production+Sharing+Agreement+)
That website offers over 620 PSAs from around the world for perusal.
The Stabroek Block PSA was signed on June 27, 2016 and was up for renewal four years later (June 27, 2019). ExxonMobil and its partners, Hess Corporation and CNOOC/NEXEN will be required to relinquish 20 percent of the contract area after June 2022.