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Exxon cannot survive without Guyana – Dr. Vincent Adams
Former EPA Director, Dr. Vincent Adams.
Kaieteur News – Guyana has been made famous for its high-quality crude coupled with how cheap it is to produce it. This makes Guyana a prized crown for any to behold. And now, the former Director of the Environmental Protection Agency (EPA), Dr. Vincent Adams, is saying that US oil company, ExxonMobil, needs Guyana more than the country needs them, especially now that the oil company is facing some financial challenges.
“They cannot survive without Guyana,” Dr. Adams says.
Dr. Adams shared those revelations during his presentation on a virtual Moray House Trust discussion in early January.
There, the former EPA Director underscored the need for Guyana to stop being intimidated by ExxonMobil and demand favourable terms as the American multinational’s standing in the future is highly dependent on the successful outcome of its projects here.
“From day one,” Dr. Adams had explained, “I felt that the contract should have been renegotiated. I am still baffled as to why we are so apprehensive to approach Exxon to revise that contract since despite what may be the impression out there, nothing in the agreement says that ‘thou shall not renegotiate.’ As a matter of fact, the contract specifically allows for renegotiation except under the condition of consent of both parties.”
But despite these provisions, the former EPA Head, who has been in the industry for most of his professional life, noted that the government has still approached the subject with reluctance.
While Exxon had threatened September last to shift investments elsewhere, if it did not get a favourable outcome during negotiations with the Payara permit, Adams stated that Guyana can merely call this “bluff” and open its doors to the long list of oil companies eager to get their hands on the sweet crude found offshore.
Notably, ExxonMobil recently slashed its oil and gas production from its operations globally to 3.7 million barrels per day in stark contrast to its push to ramp up production in Guyana.
This would lead to Guyana accounting for a quarter of ExxonMobil’s total daily global production, which is being ramped up in the Stabroek Block, projected at 750,000 barrels per day in five years’ time.
These disclosures were had during its Investor Day Conference on Wednesday last, when Chief Executive Officer, Darren Woods, announced too that ExxonMobil has taken a decision to further slash its capital expenditure globally—a stark contrast to its increased expenditure in the Guyana Stabroek Block.
This, Dr. Adams says, should be the foundation for Guyana to renegotiate the lopsided contract. But he says the most critical change that should be made in any renegotiation is the abandonment of the production sharing agreement (PSA) and just secure royalties and taxes from oil companies operating in Guyana.
Further in his presentation, he said that, “We do not have the capacity to do PSA. A lot of countries have realized that and they are going back to these concession-type contracts. All we need, to put it very simple, in a concession type contract is to be able to count barrels to make sure that we have the meter running right, et cetera, and we get our fees and taxes whatever they sell, or whatever they produce.”
A prime example of one country that abandoned PSAs is Indonesia, the country that created this type of agreement. In this arrangement, it stipulates that the host country will receive its profits after the oil company deducts its operating expenses.
At the beginning, the Government of this Southeast Asia nation had thought that this was a wise move, but with each passing year, it soon noticed that its cut of the spoils got smaller; the taxes from the oil sector began to shrink and the operators’ claims of deductable expenses were increasing by the millions.
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