Current crop of leaders cannot be trusted to renegotiate oil deal with Exxon

May 29, 2022 News

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…has already shown incapable of standing up to oil giant—Int’l Experts

“When you look at the government’s record; changing the environmental permit, granting the Payara permit against the wishes of people in the county, rushing through with Yellow tail, rushing to do a Gas-to-Shore project when the World Bank says here is little or no domestic market for gas in Guyana , when you look at all of these factors where the government does have a choice and they have been so pro-oil, do you really think that Guyana can renegotiate any sort of improvement to the situation at the moment.” – Melinda Janki

By Gary Eleazar

Kaieteur News – Esso Exploration and Production Guyana Limited (EEPGL)—ExxonMobil Guyana—five years ago secured an environmental permit to develop and produce hydrocarbons, namely crude oil and Natural Gas from the Liza I field in the Stabroek Block, offshore Guyana.

That permit was said, at the time, to be valid for 25 years but this was challenged in the local courts by International Lawyer, Melinda Janki, who successfully argued that the law only permitted the Environmental Protection Agency (EPA) to issue a permit for five years.
As such, on Tuesday, that permit expired and would have to be renewed before any further production can be continued.
It is with this in mind that a global none profit organisation, Avaaz, put together a press engagement this past week to call on the EPA and other Guyanese leaders to put a halt on the project and not renew the project unless and until, the lopsided deal is remedied.
Janki was joined in her calls by the Director of Financial Analysis for the Institute for Energy Economics and Financial Analysis (IEEFA), Tom Sanzillo.

When asked, however, about the renegotiation of the Production Sharing Agreement (PSA) inked between ExxonMobil Guyana and their partners and government – since as a developing country Guyana needs the revenue stream – Janki said, despite this being “a really bad deal for Guyana and it puts Guyana at risk,” such a course of action with the current crop of leaders could prove to be riskier.
She qualified her position saying the government has so far shown that it is incapable of standing up to ExxonMobil.
According to Janki, “I think one would have to ask the question do you trust this government to negotiate with ExxonMobil?”
The international lawyer told media operatives “when you look at the government’s record,” such as “changing the environmental permit, granting the Payara permit against the wishes of people in the county, rushing through with Yellowtail, rushing to do a gas-to-shore project when the World Bank says here is little or no domestic market for gas in Guyana , when you look at all of these factors where the government does have a choice and they have been so pro oil do you really think that Guyana can renegotiate any sort of improvement to the situation at the moment.”

She posited, “We may have a situation where renegotiation is a risk to the Guyanese people not a benefit.”
The lawyer—who has already been successful against ExxonMobil in court and had caused the permit’s validity period to be reduced from 25 years to five years in keeping with the law—noted that renegotiation would only come about if the oil company was looking to extract more gains from the country through its PSA.
She noted that the existing PSA dictates that renegotiation is only possible when all of the partners agree, namely EEPGL—ExxonMobil Guyana—Hess Guyana Corp, China National Offshore Oil Company (CNOOC).
With this in mind, she noted that the purpose of an oil company is to make money “it’s not to act in the best interest of the people of Guyana; it’s the government’s job to act in the best interest of the people.”
To this end, Janki observed “…if there is any renegotiation it would only be because Esso (EEPGL), Hess and CNOOC want a better deal for themselves and their shareholders , it will not be because Guyana can negotiate a better deal for Guyana.”
It would be poignant to note that the key people that would be involved in such a renegotiation process would include subject Minister, Vickram Bharrat, Vice President Bharrat Jagdeo, Minister with responsibility for Finance, Dr. Ashni Singh and Guyana Geology and Mines Commission(GGMC) Head, Newell Dennison, at the very least.

According to Janki, “from the start I have said that the important issue is to ensure that the government and oil companies obey the laws of Guyana; those laws are there to protect the country and the people. If that means that the operations have to stop then they have to stop.”
Sanzillo in his contribution, as reported earlier by this publication, had highlighted that given the formula for the division of revenues had from the field, it is very likely that Guyana under the PSA would not see any significant earnings.
He noted that at present, the current monies said to be spent by ExxonMobil for projects developed and are under development would not be completely repaid until 2070, repaying some $75B in investments in addition to interests accrued.
Sanzillo had also highlighted that under the existing PSA, for every US dollar that Guyana earns per barrel of oil produced in the Stabroek Block, the oil companies walk away with six dollars.

Compounding the situation is the fact that at present, given the developments already undertaken and underway, each citizen of this country owes the oil company some US$44,000 (G$9M).
This situation is likely to change, since the rapid pace of discoveries would also lead to the rapid increase in debt.
It is with this in mind that Sanzillo called on the Guyana Government to use the situation as leverage to address the numerous shortcomings in the contract.
He told attendees at the webinar, unless this is done, then the renewal of a permit with no additional restrictions and financial reforms would simply see the renewal process as a rubber stamp arrangement.
The lopsided arrangement alluded to by Sanzillo is another in the long list of abuses of Guyana.

He was adamant, if the government fails to change the deal it would have failed the people of Guyana. As such, he was of the view that Guyana may never see its fair share of earnings from its oil blocks and as such pressed for government to open up its books in order for the people to be able to determine the state of affairs.
The IEEFA Financial Analyst said, “We are not the only ones saying that this is a bad deal for Guyana” even as he reminded that stakeholders from around the world have been saying the same thing. With this in mind, he noted that in recent days there are regular announcements made of new discoveries and it is being seen as a positive thing.
According to Sanzillo, however, under the present arrangement every time he sees an announcement of a new discovery, to him, that just means the mountain of debt will pile up before Guyana can get more earnings from its oil fields. He reiterated that with US$75B to develop what is already planned, that would take until 2070 to pay back.
With this in mind, Sanzillo said, “Our concern is that Guyana will never see the revenues it was promised.”

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