Loophole allows Exxon to relinquish 20% of Stabroek Block in seven years, instead of 75%

Oct 11, 2021 News

– Company now in race against time to lock in more discoveries

Kaieteur News – The Stabroek Block Production Sharing Agreement (PSA) is often described by industry stakeholders as being replete with provisions that sell out the interest of present and future generations of Guyanese. One glaring example of this relates to the Relinquishment Provision. It speaks to the giving up of portions of the oil blocks over the ten-year exploration period.
During an invited comment, Attorney-at-Law and Chartered Accountant, Christopher Ram lamented that both the Coalition and the PPP/C Governments have utilised a loophole in the Petroleum Act to the benefit of ExxonMobil and its partners, Hess Corporation and CNOOC.

Chartered Accountant, Chris Ram

Ram explained that the initial period of a prospecting licence is four years. Such licence is subject to two renewals of three years each. Expounding further, the lawyer said, “The standard provision in the Petroleum Act is that on an application for first renewal at the end of the four years, the company is required to give up 50 percent of the blocks granted and on an application for the second renewal, which is at the end of seven years, it is required to give up 25 percent of the remaining concession.”
He added, “At the end of the 10 years, which brings you to the end of the third renewal period, the company has to give up all portions of the block not subject to a production licence…”
He noted that under normal circumstances, ExxonMobil would have been expected to follow the foregoing process. Instead, through the reckless abuse of the loophole in the law which obliges that the subject Minister can vary the relinquishment arrangements, no relinquishment is required after four years and only 20 percent after the end of seven years, compared with 75 percent in normal situations.
He was keen to note that the first person to utilise this loophole was Janet Jagan in the 1999 Pre-discovery Agreement and made worse under the 2012 model Agreement produced during the time of former President, Donald Ramotar and former Natural Resources Minister, Robert Persaud. But, the Chartered Accountant reserved his disgust with Trotman, Greenidge and Granger, the key players in the 2016 post-discovery Agreement and its relinquishment provisions.
Ram expressed the fear that with little oversight and undisclosed arrangements between ExxonMobil and the Government, the blocks to be given up in 2023 can be subject to any form of machination via production licences. ExxonMobil and its friends are pushing for more and more explorations licences so that by the time the first relinquishment is due in 2023, the 20% would be of a considerably reduced portion of the Stabroek Block.
To date, ExxonMobil has made over 20 discoveries in the Stabroek Block. It is also rushing to find more oil discoveries before the end of the year and no doubt before 2023.