Exxon goes to court to maintain lopsided oil contract

Mar 10, 2022 News

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…Glenn Lall’s historic case challenging tax giveaway opens today

Kaieteur News – Exxon’s subsidiary Esso Exploration and Production Guyana Limited (EEPGL) is fighting to maintain the status quo of the lopsided Production Sharing Agreement (PSA) it has with the government.

This position is clearly outlined in the application by EEPGL to join the case filed by Kaieteur News’ (KN) Publisher, Glenn Lall, over the repressive tax provisions contained in the Stabroek Block PSA. The matter is expected to commence today at 10:0hours before Justice Nareshwar Harananan at the Georgetown High Court.
The PSA between the oil giant, its partners and the Government of Guyana states inter alia that, “…no tax, value-added tax, excise tax, duty, fee, charge or other impost shall be levied on the Contractor or Affiliated Companies, in respect of income derived from Petroleum Operations with the Stabroek Block.”
The Stabroek Block is currently being drilled by Exxon’s subsidiary EEPGL, Hess Corporation and CNOOC Petroleum Guyana Limited.
However in January, KN’s publisher, through his attorney, Mohamed R. Ali, filed an action in the High Court which outlined that the tax reliefs listed under Article 15.1 of the Petroleum Agreement, dated June 27, 2016, between the Guyana Government and the oil companies, violate the Petroleum Exploration and Production Act, the Financial Administration (and Audit) Act, the Prevention of Discrimination Act, and the Constitution.
In that court case, Lall is seeking declarations to have the provisions nullified and reversed. Last Thursday, EEPGL, the Exxon operator, filed an application to join the proceedings alongside the Government of Guyana to oppose the court case. According to the document which was seen by this publication, the Exxon operator noted it has “a very real and substantial interest,” in the matter. In an affidavit to support the application, President of ExxonMobil Guyana, Alistair Routledge outlined concerns that EEPGL and its co-venturers are the ones that would be most adversely affected, if the 17 declaratory judgments sought by the applicant (Lall) should be granted.

Routledge claimed that the Petroleum Agreement was soberly negotiated with the Guyana Government. He stressed that, “certain fiscal arrangements therein agreed with the Guyana Government make the Liza Phase 1 Project, the Liza Phase 2 Project and the Payara Project financially feasible and commercially viable.”
Routledge noted further that in addition to the above-mentioned projects, Esso and its co-venturers have committed themselves to massive and substantial expenditures both past, present, and future totalling billions of US dollars.
He explained, “If the declaratory reliefs the applicant is seeking are granted, it would similarly cause Esso and its co-venturers to sustain substantial and potentially unsustainable financial loss and damage. The ExxonMobil Guyana President continued, “The subject matter of the instant litigation is whether Esso and its co-venturers are entitled to enjoy the fiscal arrangements negotiated and agreed in good faith with the Guyana Government.”
He added that “Esso and its co-venturers have expended sums in excess of US$4 billion of total expenditures to execute the Liza Phase 1 Project. Esso and its co-venturers are also in the process of expending another US$6 billion to execute the Liza Phase 2 Project and yet another US$9 billion to execute the Payara Project.”
As a result, Routledge contends that Esso and its co-venturers’ constant position is that there is no legal justification for any change to these arrangements which were solemnly agreed to between the parties. He emphasised too that “if the basis on which the Petroleum Agreement was negotiated and agreed is changed, that would cause Esso and its co-venturers considerable economic disruption, confusion, and uncertainty.
“Naturally, as these expenditures were premised on the agreements contained in the Petroleum Agreement, inclusive of its fiscal arrangements (including tax exemptions/reductions for Esso and its contractors), Esso and its co-venturers have a very real and vested interest in maintaining the Petroleum Agreement in the form which was agreed. Esso has a very real and substantial interest in the subject matter of these proceedings, namely whether the terms and provisions of its Petroleum Agreement with the Guyana Government are lawful and valid, and whether it would be entitled to carry out the above-described projects based on the said provisions of its Petroleum Agreement, and it is thereby entitled to be a party to the said proceeding,” Routledge explained.

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