Future generations will have to pay the price for lopsided Stabroek Block PSA - Goolsarran

Future generations will have to pay the price for lopsided Stabroek Block PSA – Goolsarran

Jan 20, 2021 News

– says pulled Global Witness report on exploitative deal still valid

Chartered Accountant, Anand Goolsarran

Kaieteur News – Even though transparency and accountability watchdog, Global Witness, recently announced that it has pulled its report on Guyana which highlighted the damning weaknesses of the Stabroek Block deal with ExxonMobil, the concerns and recommendations listed in the document still remain valid says Chartered Accountant, Anand Goolsarran.
In his most recent writings, Goolsarran said that the report confirms what citizens have been saying all along: that the 2016 Production Sharing Agreement is overwhelmingly weighted in favour of the U.S. oil giant; that the agreement should be renegotiated to provide Guyana with a better deal; and that while companies exist to maximize shareholders’ wealth, such an approach should be tempered with a social conscience, by not taking advantage of weak negotiation skills, among others, especially for a poor developing country like Guyana.
Goolsarran also reiterated his previously stated view that Exxon took total and absolute advantage of Guyana because of the nation’s desire to not only use the company’s presence to act as a buffer against the Venezuelan threat to Guyana’s territorial integrity but also to produce oil in time for the 2020 elections. The former Auditor General said that ExxonMobil used all possible means to extract the best outcome for itself without regard for the welfare of Guyanese.
In the final analysis, Goolsarran said, “It is the future generations that will have to pay the price for what happened in relation to the Production Sharing Agreement (PSA) with ExxonMobil as well as other licences granted (Kaieteur and Canje).”
He added, “When one reflects on the environmental damage that would be caused when the eight billion barrels of oil are extracted and burnt as well as the pittance we are receiving for exploiting our natural resources, it might have been better to leave the oil to where it belongs and focus on developing the Guyanese economy through a programme of diversification.”
While the pulled Global Witness Report called “Signed Away” would have focused on the suspicious circumstances in which the Stabroek PSA was granted, Kaieteur News would have exposed via its own extensive study published in 2019 that the said deal has some of the world’s worst provisions when compared to 130 other deals.
For example, the PSA 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, 2020). ExxonMobil and its partners, Hess Corporation and CNOOC/NEXEN will be required to relinquish 20 percent of the contract area after June 2023.