GUYANESE NEED A FAIR DEAL OIL CONTRACT: WHO WILL SPEAK FOR THEM?

Feb 15, 2022 Letters

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Dear Editor,

Exxon’s CEO Darren Woods is scheduled to attend an Energy Conference in Georgetown, Guyana on Tuesday February 15.
He will be flying in with his private corporate jet. The conference is a sort of celebration of Guyana’s Arrival as a member of the prestigious Oil Club. Attendees: Ghana’s President Akufo-Addo, Suriname’s President Santokhi, Barbados Prime Minister Mottley, the world’s most celebrated Oil historian/economist Daniel Yergin, and several Ambassadors of ABC and EU countries based in Georgetown, Guyana.
Who will be courageous enough and be willing to put in a word for the Guyanese people? You may say: Of course, the Guyanese Vice President Jagdeo speaks for the Guyanese people – but therein lies the whole purpose of this essay.
A funny line has begun appearing in Guyanese chat rooms and social media: Darren Woods to visit his plantation. Folks familiar with the colonial history will understand the “plantation” remark and be able to relate it to what is happening today. In the 1700’s and 1800’s, Guyana was a British colony and had more than 400 sugar plantations, all owned by absentee Europeans. Most never set foot in Guyana; but their plantations were run by overseers. They made a lot of money for the planter class. One plantation was owned by Gladstone whose son later became Prime Minister of Great Britain. Gladstone never set foot in Guyana.
I was born and raised in Guyana and have settled in the United States. Growing up in the villages of Guyana, the first decolonization leader Cheddi Jagan was never tired of coming to the villages and telling us why we were so undeveloped and poor: because our industries sugar and bauxite were all owned by foreign investors. They mine the bauxite ore, ship it abroad, smelt it into aluminum, and the value goes up to 30-times what we get paid for a ton of ore. Jagan would always say, “We get paid pennies on a ton.”
Guyana got its independence in 1966. We are a sovereign nation. Now we can negotiate on our own terms fair value for our resources. That was the dream for an Independent nation. Or so we thought.
Fast forward to 2016. Oil had been discovered in 2015. An oil contract (called a PSA, Production Sharing Agreement) had been signed in 2016 by Guyana’s then Minister of Energy, Raphael Trotman at Exxon Headquarters in Houston, Texas. A single Minister’s signature made the contract binding and will remain fixed for the life of the contract, 30-years. The contract had been negotiated in secret, kept secret for over a year. After much public agitation and protest, only then President Granger relented and made the contract public.
To say the contract had been rigged, the nation had been sold out, is an understatement. There is no evidence of a negotiation – that some 33 Articles and over 100 Clauses of the contract had been analyzed and vetted with the help of Minister Trotman’s staff and hired consultants. End result: The PSA provides for no corporate income tax to be paid by oil companies, 2% royalty and a 50/50 split of the profits after Cost Recovery capped at 75% is taken off the top. This works out to 12.25 barrels out of every 100 for Guyana.
We are told Guyana’s share of “profit oil” will increase as the Capital and other costs are amortized presumably on an expedited scale. The PSA provides for no “ring-fencing” – this means the spreading and commingling of cost of ongoing development of new wells over the next 30-years will keep the 75% cost recovery running for as long as possible. This will minimize profit oil, thus making Guyana’s “take” as low as possible for as long as possible. There is no pro-forma schedule to show how Guyana’s share of profit oil will rise from 12.25 barrels to say 30 barrels out of every 100.
Guyana’s per capita income in 2020 is listed at $4,500, with a population of 780,000. There are no highways, no potable water systems and no reliable power supply in this country. Hospitals and schools are inadequately staffed and lack basic supplies and equipment. Recently, a local newspaper carried a story of a 17-year-old HS student who was successful at his exams – but reported that he had to sell plantain chips to earn money to pay fees for after school tutoring and pay bus fares to and back from school. Not enough trained teachers, no libraries, almost 50% of students must pay for after school lessons to help them pass their exams.
Such is the socio-economic condition of this nation. And, it is stuck with a PSA that cannot be renegotiated; must remain in effect for the next 30-years. If you ever heard of a rigged, lopsided contract, this is it.
[Embed picture of posterboard here]
http://www.oggn.website/wp-content/uploads/2021/12/suriname-vs-guyana-contract.png
Two countries, Guyana and Suriname share the same oil basin. Let’s look at our posterboard showing comparisons of revenue streams of the two countries’ oil contracts. What Guyana is foregoing or losing? The difference in royalty of Guyana’s vs Suriname’s is 4.25%. This works out to $24.86 billion dollars on 9 billion barrels of crude reserves from one oil block. (9 billion barrels multiply by Average price $65 multiply by 4.25% = $24.86 billion). This is what Guyana is losing/foregoing on Royalty alone on one oil block. Over the next 30-years on estimated reserves of 30 billion barrels of crude, the losses will amount to many more billions.
Guyana’s loss: Windfall gains to Oil Companies shareholders.
Global Witness estimated that Guyana stands to lose $55 billion on 9 billion barrels. GW also urged the Jagdeo-led govt in 2020 to put on hold approval of the operating license for the Payara oil block – use it as leverage to renegotiate for a Fair Oil contract. Vice President Jagdeo refused.
Darsh Khusial, a leading activist of the Oil & Gas Network estimated that Guyana will lose an estimated $91 billion on 30 billion barrels crude reserves.
How did a poor, small country like Guyana get caught up between such a rock and a hard place? Why are both the PNC govt. (2015 – 2020) and the current PPP govt. led by VP Jagdeo refusing to ask Exxon to come back to the negotiating table to make the contract just a little bit fairer. Just give us the same 6.25% royalty Suriname gets and a 15% profits tax (Suriname’s 36%) – and the Guyanese people will be happy.
This is not a mystery. Guyanese who know the politics of this country know the answer to this question. PNC’s Minister Rafael Trotman who signed the contract in 2016 told the Guyanese press that he had been instructed to sign. Now 5-years later, he has never revealed who instructed him to sign. The Guyanese people know something funny happened in Houston on that fatal day when Minister Trotman ignored the advice of his paid consultants who urged him not to sign – but to negotiate for a better deal. Mr. Jagdeo’s PPP campaigned for the election held March 2020 on the promise that he will renegotiate the Oil contract. Once he won the elections and took the oath of office, he reneged on his promise. The Guyanese people in a flash knew something funny happened. Then Alistair Routledge, president of Exxon (Guyana) revealed he held talks with both parties’ leaders in the run-up to the elections – and both promised not to ask for renegotiation. It was the closest thing to a bombshell being dropped in Guyana’s steamy racial politics.
This much is clear. Both leaders were desperately afraid that if they said yes to renegotiation, Exxon has the power to swing the election to their opponent. Exxon exploited the fears of both leaders. Exxon literally owned and called the shots in Guyana. It is as if this little country has been re-colonized, this time not by sugar planters but by the Oil Giants.
This contract represents a humiliation imposed on the Guyanese nation. This contract must not stand. It represents a loss to the Guyanese nation of an estimated $91 billion on 30 billion barrels over 30-years. The contract can be renegotiated providing both parties – Host govt and Exxon – agree.
How does one party get the other party to agree? Just ask. Mr. Jagdeo, the de facto president has declared publicly that he will not ask. For him, it might very well be a secret promise, which he had made in the run-up to the 2020 elections. Many supporters of VP Jagdeo say Mr. Jagdeo has learned his lesson from past mistakes and history. They are obviously referring to the ousting of PPP’s Cheddi Jagan from power in 1964 with the help of the CIA. Darsh Khusial of OGGN argues that that was a different era – Jagan was ousted because he was a Marxist. There is no reason to think the U.S. govt. would collude with Exxon to oust VP Jagdeo from power were he to ask for renegotiation and use his inherent leverages (Guyana owns the resource) to force Exxon back to the negotiation table.
Of all the heads-of-State and the noted oil economist attending the conference – PM Mottley, President Santoki, Ghana’s President and Dr Daniel Yergin – would anyone of them be moved by the unfairness of this contract – to make an appeal to the good consciences of Exxon, gently nudge Mr. Darren Woods to agree to renegotiate this contract, just to make it a little bit fairer for the 780,000 people who live in Guyana. A bare 6.25% royalty and 15% profits tax rate (Suriname’s is 36%) – and liability insurance in the event of an oil spill will suffice to make the Guyanese people happy. Dr. Jan Mangal, an oil expert who was once the advisor to a previous Guyana president had this to say: A PSA contract between Host country and Exxon and its partners is like a good marriage – it must last for 30 or more years.
Yours truly,
Mike Persaud

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