Guyanese must have a say in crafting new PSA

Aug 23, 2022 News

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– Youth Policy Advisor and Economist Elson Lowe

By Zena Henry

Kaieteur News – Given the “unsatisfactory” handling of the local oil and gas sector by the Government, and their continued posture in not renegotiating the lopsided 2016 Production Sharing Agreement (PSA) it has with US oil company ExxonMobil and partners, local stakeholders are calling on the Government to make public, as soon as possible, the contents of any new PSA to ensure better returns for Guyana.

The need for the early release of the document is especially important as Guyana is heading to its first bid round for available oil blocks which are expected to be auctioned off by year end and with the possibility of a national oil company being formed to play a role in that regard.

The Government has not been clear on the role the national oil company (NOC) will play as to whether it will be part of developing the oil blocks and/or facilitating the auction, but they have disclosed that they are looking for a “strategic partner” that will have total management and operational control since the administration is only seeking “passive” involvement in the NOC. At this time, President Irfaan Ali has stated, the Government is still receiving data and technical advice on how to proceed with the NOC and has thus pushed back the decision on the NOC and the auction which was supposed to be held next month.

Economist and Youth Policy Advisor to the Office of the Opposition Leader, Elson Lowe, has thus contended that as preparatory works are set for the auctioning of the country’s available oil blocks, Government should begin engaging the public on what will and should be provided in any new PSA to not only give citizens a say, but to ensure better returns in-country from the nascent industry. Guyana’s main say in relation to the offshore developments involving ExxonMobil comes after the company would have made its investments and the bills are handed to Guyana for auditing and verification, with the option of objecting to costs that seem illegitimate.

Lowe has insisted therefore that given the administrations “lax approach” to the audit of Exxon’s costs, there is no reason to view the People Progressive Party Government as credible when it comes to them pressing ExxonMobil for anything more than what is in the current PSA despite the chants of many concerned stakeholders, including foreign observers within the global oil industry.

“What should be done now is the new model PSA should be released for public consultation,” Lowe said. He contended that releasing the new agreement “…will allow Guyanese to buy into the terms of any future contracts so there is a reasonable level of national consensus.” He noted further however, that “the lack of any such meaningful consultations with the public or opposition is an indicator that the PPP is afraid of what Guyanese will see in the new model PSA.”

The Economist submitted that it is difficult to know what is the best possible PSA Guyana could have achieved, but noted that since a new PSA is in the works for new participants in the local oil and gas sector, citizens should know what the new document entails and the take available for Guyana. Vice President Jagdeo during a public outreach a few weeks ago had said that some foreign stakeholders continue to claim that the contract with Exxon is good for Guyana when that is not the case. He added that the contract would be renegotiated, but in the future. The VP however clarified at a Press Conference last Friday that his comments were not in relation to the Exxon contract, but those agreements to come on stream which he has said would be vastly different from what Guyana currently has with Exxon.

The Exxon contract has nonetheless been the topic of gross contention since it is widely agreed that Guyana remains financially and environmentally exposed to damages associated with the oil sector. Some stifling provisions within the oil sharing agreement relates to Guyana paying millions of dollars in taxes on behalf of the oil companies. The contract caters for no ring fencing, giving the oil operators a free pass to access and utilize monies from different fields to conduct its business, keeping in mind however, that investments into the oil projects, whether generated from the oil operation itself, is nonetheless repaid to the company by Guyana as expense.

The contract does not cater for certain payments to Guyana to be non-recoverable, such as the two percent royalty earned by the country as the owner of the oil resource, and since royalty had been stated as an expense on Exxon’s financial documents, the general consensus is that the money is being reclaimed when the company takes out its 75percent investment before sharing the remaining 25 percent profit with Guyana.

Lowe said that Guyanese must know exactly what new will come in the new PSA since changes can be made to the current document which government is refusing. He said that Government could have renegotiated the current PSA by merely moving a few words around without changing any of the meaningful terms of the contract. He stated therefore, that for the Government to merely say that changes will be made to the new PSA is just not enough.

 

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