You can’t buy food with cigarette money

Feb 18, 2022 Features / Columnists, Peeping Tom

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Kaieteur News – The PPP/C is repeating the same mistakes as the APNU+AFC. The PPP/C is in a strong position to wrest concessions from the operators of the Stabroek Block, but has thus far refused to do so despite the leverage at its disposal.
Having discovered oil in 2015, Exxon Mobil was forced to approach the APNU+AFC for the renewal of its exploration licence and for a production licence. Instead of using this opportunity to ensure a fair deal for the people of Guyana, the APNU+AFC opted to secretly sign an agreement with ExxonMobil, Hess and CNOOC – a secret which it hid from the Guyanese people for 18 months.
That agreement was lopsided. The agreement provided for a miserly 2% royalty, a 12.5% profit sharing (share of oil after expenses) and a pittance of US$18M as a signing bonus. The agreement also did not cater for ring fencing or full insurance. It obligated Guyana to pay Exxon’s taxes, gave over-generous concessions to the oil companies and placed them above the country’s laws by virtue of the Stability Clause.
The PPP/C government recently described this agreement, signed by the APNU+AFC, as the greatest crime committed against the country. Considering that in 1978, more than 900 persons died at Jonestown in Guyana, the PPP/C clearly was saying that the Production Sharing Agreement signed by the APNU+AFC was a greater tragedy than the Jonestown mass murder/suicide.
The PPP/C however during the campaign for the 2020 elections began to send mixed signals. The party claimed that Exxon was a pioneering investor and therefore its contract would not be renegotiated under a PPP/C government. It said that those who came after, including Tullow, would be subject to new terms.
It was the PPP/C however, which had argued that by virtue of the discovery of oil, the Guyana Basin had been de-risked. Yet, it contradicted itself by implying that as pioneers in oil exploration, Exxon would not be subject to renegotiation.
After it won the 2020 elections, the PPP/C abandoned the pioneering argument. Instead, it said that it has to respect the sanctity of contracts. The irony of the PPP/C’s position is that the very contract, that sanctity of which it has to respect, provides for renegotiation.
The PPP/C also has the means to demand better terms. The oil companies have to approach the PPP/C for permits for the Payara Field Development Project and the Yellowtail Field Development Project.
Instead of using this leverage to renegotiate the contract, the PPP/C meekly approved the Payara Field Development Plan in a jiffy. In so doing it has betrayed the country and its people.
But the PPP/C has another chance to make amends. Exxon and her partners are going to approach – if they have not done so already – the government for the permit for its fourth field development plan.
The PPP/C has another opportunity to fix things, including demanding ring fencing and full insurance. It can stay within the terms of the existing Production Sharing Agreement but insist that when it comes to the new field development plans, that the oil companies make provision for ring fencing and provide full insurance.
Glenn Lall, the publisher of this newspaper, has been leading the crusade for a better deal. But he is insisting that the PPP/C use the present circumstances to demand full insurance, ring fencing and a lowering of the interest rate on the oil companies’ borrowing – an interest rate which Guyana has to repay.
The PPP/C however is very evasive on this issue. It is refusing to indicate whether it will make any such demands. In this regard it is looking and smelling just as the APNU+AFC did in relation to its dealings with the oil companies.
The future of Guyana depends on renegotiation and on wresting greater concessions from the oil companies developing the Stabroek Block. Guyanese must not become excited with all the talk about oil riches.
The oil revenue that Guyana is receiving is a trickle in comparison to the downpour which we should have been receiving. The sums which we have received for the first two years of oil production will not be enough to foot half of the gas-to-shore pipeline.
One participant at the International Energy Conference advised that the government restrain itself in providing cash grants to citizens. He is right on two counts. It will create a dependency syndrome and it is unsustainable.
The crumbs which the present contract is delivering will not be sufficient to sustain any substantial cash grants to the population. And, unless there is renegotiation of the contract, our oil will disappear and we will remain poor just as Guyana’s gold was extracted and exported by Omai and the country remained mired in poverty.

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