Latest update December 4th, 2024 2:40 AM
New oil contracts should be subject to review on a regular basis – Oil Expert
University of Houston instructor, Tom Mitro
Kaieteur News – University of Houston instructor, Tom Mitro is of the view that future petroleum agreements should include features which allow a periodic review of the contract terms.
This, Mitro gave, among several recommendations when beckoned for advice on the revision of the Canje and Kaieteur Blocks contracts, in the event that commercial discoveries are made there.
This particular recommendation regards a strict provision of the Stabroek Block production sharing agreement (PSA) signed by former Minister of Natural Resources, Raphael Trotman, called the stability clause.
In advocating against such a strict stability clause, Mitro said, “The world changes dramatically in four or five years and the contract may not still be relevant or equitable in 2025/2026.”
The stability clause has been so bitterly condemned that Attorney-at-Law Christopher Ram said it gives the distinct impression that ExxonMobil went above and beyond to strangle Guyana’s Parliament and future governments.
The Stability Clause of the oil contract, at Article 32, states that, “Except as may be expressly provided herein, the government shall not amend, modify, rescind, terminate, declare invalid or unenforceable, require renegotiation of, compel replacement or substitution or otherwise seek to avoid alter, or limit this agreement without the prior written consent of the contractor.”
This is the basis of the clause, which binds Guyana to one set of terms for decades. The other terms serve to reinforce it. For instance, another term of the stability clause dictates that if Guyana were to amend any of its laws or its tax code, which would affect the economic benefits of the contractor under the agreement, the Government would have to foot the bill to restore any lost economic benefits. Alternatively, it would require that Exxon and its partners, Hess and CNOOC, be exempt from any such new or updated laws.
Over the years, widespread condemnation of the Stabroek PSA and calls for its revision have met up with this rigid stability clause. Guyana has been placed in such a position that, due to ExxonMobil’s suffering financial position, the company needs Guyana more than Guyana needs it, according to one energy expert, Gerard Kreeft. Yet, Guyana has not demanded better fiscal terms, despite years of sustained calls for a renegotiation.
“It’s basically a case right now of the tail wagging the dog,” Kreeft had said of the Guyana-Exxon relationship.
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