Exploitative Exxon contract torturously unfair — Int’l Lawyer

Jan 05, 2022 News

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 “…under this deal, when you take everything into account, Guyana gets roughly 10 percent and Exxon and its two partners get 90 percent, if that isn’t exploitative, then I don’t know what is and I think it’s really important that people should understand that the oil sector is exploiting them,” Melinda Janki

…is already making vast majority of Guyanese poorer, not richer

…but the politicians always do well in countries that produce oil

Kaieteur News – The “exploitative” Production Sharing Agreement (PSA) that was signed between Guyana and three small offshore companies, Esso Exploration and Production Guyana Limited (EEPGL)—ExxonMobil Guyana—Hess Guyana Corporation and China National Offshore Oil Company (CNOOC), is in fact already making the vast majority of Guyanese poorer, not richer.
This was the conclusion expressed recently by international attorney-at-law, Melinda Janki, who in a recent online interview on the Oil and Gas Network in Guyana, posited, “…oil is (already) making Guyana poorer, not richer, this isn’t simply my opinion; this is the market.”

To this end, she was adamant that ExxonMobil and their partners are, “making money because they are exploiting the people of Guyana. That’s how it’s profitable (for them) but oil is making Guyana poorer and not richer.”
She did posit, “a few will get rich” and cited as example, “politicians always do well in countries that are producing oil and that’s not a controversial statement. Just look at any country that is producing oil and you will see that the politicians have done very well for themselves, Nigeria, Angola, Chad Cameroon, etc; so it is making the vast majority of Guyanese people poorer not richer.”
Qualifying her position further, Janki iterated, “the petroleum agreement in which the three oil companies, ExxonMobil, CNOOC and Hess, not the three big (parent) companies, we talking about three little offshore entities that have an agreement with the government of Guyana to take the oil.”
Under that agreement, she said, “first of all they can take as much free oil as they say they need for the operations. Then out of what is left, they can claim up to 75 percent every month for their expenses, and you know all the arguments about whether the expenses are being audited, being accounted for properly and so on. Then what is left, let’s say roughly 25 percent; that’s split. Guyana gets 12.5 percent of the oil.”
Compounding the situation, Janki reminded that under the PSA, Guyana gets its oil.
“Guyana does not get money, and then Guyana has to sell that on the open market, and as you know, Guyana has no experience in selling oil and has to hire someone to collect it, and to sell it, which is another cost, and then Guyana gets a two percent royalty.”
Additionally, because the government has agreed to pay the taxes for the oil companies, “if you look by the calculations done by the Institute of Energy Economics and Financial Analysis (IEEFA) you will see that, that actually takes Guyana’s share down to about 10 percent.”
As such, she posits, “under this deal, when you take everything into account, Guyana gets roughly 10 percent and Exxon and its two partners get 90 percent. If that isn’t exploitative then I don’t know what is and I think it’s really important that people should understand that the oil sector is exploiting them.”
According to Janki, Guyanese people must understand “this oil does not belong to the government. The government doesn’t own anything; all national assets belong to the people and the government is supposed to manage those assets to the benefit of everybody in the country irrespective of party affiliation, irrespective of age, gender, race, everything; it must benefit everybody equally and clearly they are not doing that job.”
Another area of exploitation, according to Janki, lies with the pre-contract cost, where the then Minister with responsibility for the sector, Raphael Trotman, “agreed that these oil companies could recover what he called, pre-contract costs.”
To this end, the lawyer reminded “…I am unable to find any legal authority to allow him to do that.”
As such, “we have a situation where the rule of law is being undermined by the petroleum sector and that is also exploitative; to have the financial exploitation in the contract. We have the economic exploitation because the oil – the petroleum – sector is going down. It’s got a limited lifespan and there is an enormous risk that Guyana will be left with stranded assets.”
Stranded assets that the Guyanese people will have to pay for, “not the government. Government has no money, the only money government has is what they take from Guyanese people in the form of taxes, duties and so on and what they get from managing natural resources in Guyana.”
She used the occasion to quip, “when you see ministers running around handing out a $25,000 here and a $25,000 there, and behaving like they are these generous people, ministers are giving you money that they took from taxpayers. It’s not their money, because at the moment they are discriminating in favour of these foreign oil companies and discriminating against the Guyanese people who are burdened with taxes while the oil companies don’t have to pay any taxes.”
Qualifying her position further, that Guyana’s PSA with the oil companies is in fact exploitative, Janki pointed to the IEEFA—a global energy think tank—where they said ExxonMobil’s corporate jewel off the coast of Guyana “is so loaded with provisions that shortchange the government that a leading industry consultant has called the contract one sided. And then they said if the Guyana contracts were not so torturously unfair it is doubtful that the project would be sufficiently profitable to warrant such significant investment.”
She pointed too, to world market economists Joseph Stiglitz and Nick Stern who have been “telling us that this contract is really one sided against the people of Guyana. They are telling us it’s so unfair, they are telling us that actually Exxon couldn’t do this project unless they were exploiting the people of Guyana.”
Elucidating further, she noted that at present in Guyana, “the oil money is pushing up prices. It means the cost of living is going up and oil production is destroying people’s livelihoods; just ask the fishermen what happen to the fish. We are beginning now to look like Nigeria.”
According to Janki, Nigerian fishermen sued ExxonMobil for compensation and in 2010 the senate committee on Environment and Ecology told ExxonMobil to compensate the Nigerian fishermen for the “ruin that the spills have brought to the community. Exxon hasn’t done it.”
To this end, she said, “we have on the one hand we have no business case for doing this and on the other hand we have the beginnings now of the environmental destruction which carries a cost because the environment is very precious.”

 

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