Renegotiation – touching one provision means having to touch all

Sep 05, 2022 Editorial

Kaieteur News – It all started with one word, then two words, and which in both instances have to do with foreign corporate trickery, and local leadership mystery. The single, standalone word is royalty, while the other two are cost recoverable. There has been some movement, but the main players, ExxonMobil and the Government of Guyana, are circling wagons in defensive postures, and playing games with frankness and hiding from clearness and truthfulness. It has to do with renegotiation of the devilish oil contract that Guyana has with America’s oil supergiant, ExxonMobil.

We start with the 2016 contract, and that expenses are recoverable. Noticeably, the contract is silent as to whether royalty is or is not recoverable, which the hawks at ExxonMobil would always seize upon to capitalise. In fact, in one of its financial statements for the period ended December 31, 2021, ROYALTY IS LISTED AS AN EXPENSE OF EXXONMOBIL. This is where the puzzle and the political mystery deepens.

The first slice of smokiness on the part of ExxonMobil and the PPP/C Government involved some careful slickness as to whether royalty was recoverable by ExxonMobil. Vice President Bharrat Jagdeo, who was also a former Minister of Finance, asserted that it was not “cost deductible” but that it is, under the laws of Guyana, “tax deductible.” Since we are paying the taxes of ExxonMobil, pursuant to the relevant provision in the 2016 oil contract, what this means then is that this country is, in effect, giving back to the oil company what it paid to Guyana as royalty. That is not a 6 for a 9, but something which is nothing but a crime.

The hard and irrefutable facts are that ExxonMobil is including royalty as an expense in its financial statements, and as part of its tax computation, and that we are obligated to pay all the company’s taxes that would have been due. Twist it or turn it, Guyana is on the hook for the royalty that belongs to it. To rub salt and vinegar in the wounds, ExxonMobil’s CEO in Guyana, Alistair Routledge, had his own slick song and dance about how the oil company is taking the measly 2% royalty out of its 50:50 share of the profits and giving it to Guyana, so that we come out on top with 12.5% +2% (royalty) to make for a sweet 14.5% total return on our oil, while they (ExxonMobil) are left with 10.5%, as its lesser share. Somebody just made two fatal mistakes: they overestimated their cleverness, and underestimated our intelligence.

Now, there are developments that point to the Coalition Government in 2019 coming to its senses about some of the deficiencies in the 2016 contract that were hurting Guyana, and taking steps to correct some of those defects. One of the material corrections (modifications) was that EXXONMOBIL COULD NO LONGER RECOVER/RECLAIM ROYALTY AMOUNTS IT PAID TO GUYANA. We at this publication understand that there is a document signed by the Coalition Government and ExxonMobil in 2019 to this effect. That is why Routledge was playing his games with royalty and ExxonMobil paying it to Guyana. Interestingly, the document has since become a national mystery, and neither the Coalition nor ExxonMobil is saying a word to clear the air. Regarding why our own government would keep such a development secret is anyone’s guess, but it cannot be for good reasons.

Further, we assert something before our readership, local and foreign. Once this development on royalty has happened, then one of the binding provisions of the 2016 oil contract has been touched, amended, even reversed. Thus, it signifies that other aspects of the contract can be open to discussion and revision. In other words, correct one provision and all the other provisions become subject to the same corrective treatment. This explains why there is so much secrecy shrouding what the Coalition Government did or did not get ExxonMobil to do with royalty, because the company doesn’t want to revisit renegotiation.

We insist that this opens the door for that hated phrase RENEGOTIATION OF THE CONTRACT, and all that it means to be tabled. Guyana must do much better by getting more, while ExxonMobil still makes handsome profits on its investments.

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