Exxon, Ex-Pres. Granger changed recovery of 2% royalty – Addendum reveals

Sep 17, 2022 News

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Two years after signing lopsided 2016 deal…

– PPP should take the example of APNU+AFC and demand renegotiation -Chris Ram

By Kiana Wilburg

Kaieteur News – The former APNU+AFC government had renegotiated and signed the Stabroek Block Production Sharing Agreement (PSA) in 2016 with ExxonMobil’s affiliate and partners. Two years after doing so, it approached the Exxon consortium, and successfully renegotiated a critical fiscal element.

According to Addendum No. 1 to the Petroleum Agreement dated April 26, 2019, it was evident that the named parties were in agreement that the contract allowed for the two percent royalty to be recovered. To plug this loophole, the Addendum that was subsequently filed with the Deeds Registry categorically stated that it shall not be recovered in any way.

Sealing the new arrangement were former President, David Granger and President of Exxon affiliate, Esso Exploration and Production Guyana Limited (EEPGL) Rodney D. Henson. Affixing their signatures as witnesses were former Head of the Energy Department, Dr. Mark Bynoe and the country’s Petroleum Advisor at the time, Matthew Wilks.

Michael Beirne and Anand Gohil signed as witnesses on behalf of Hess Guyana Exploration Limited and CNOOC Petroleum Guyana Limited respectively.

The foregoing document was first disclosed by Chartered Accountant and Attorney-at-Law, Christopher Ram in his column that was published in Thursday’s edition of the Stabroek News.

The Addendum for which this newspaper has secured a copy, states that the parties engaged in discussions and “in the interest of the avoidance of all doubt, the parties have come to a mutual and satisfactory agreement that the payment of royalty pursuant to Article 15.6 of the Petroleum Agreement shall be borne solely by the Contractor.” It goes on to state that “the said royalty payment shall not be recoverable cost, in any manner or formulation under the Petroleum Agreement.”

Annex C of the PSA, specifically subsection 3.3 titled “Costs not recoverable under the agreement” was then modified and amended to also include: (h) payments of royalty by the contractor made in accordance with Article 15.6 of the agreement.

Unaware of the existence of the foregoing document, Kaieteur News was first to raise the matter that the 2016 PSA allows for the two percent royalty to be recovered. Questions on the matter were posed to Vice President, Bharrat Jagdeo on two separate occasions by KN Publisher, Glenn Lall. Jagdeo during his most recent appearance on Lall’s radio programme, The Glenn Lall Show, said the contract allows for the minister to grant approval for the royalty to be recovered. He categorically stated, however, that no such permission has been granted hence it is not being recovered.

The Addendum which was exposed by Ram exposes that indeed, royalty is not to be recovered. Importantly, this was made possible because it was renegotiated and amended by the Granger administration.

In his column, Ram expressed concern that this document was not mentioned earlier by those policy leaders who have been arguing staunchly that royalty was not being recoverable.

He said the APNU + AFC Coalition suffered a barrage of criticism for what is often referred to as a lopsided oil contract. Be that as it may, the Chartered Accountant said, “The Coalition must be given some credit for at least effecting the renegotiation of one element of the Agreement, albeit not a particularly major one.”

Ram said the question inevitably arises as to why the current Administration keeps repeating that it would not amend the contract in the interest of sanctity of contract. Ram reasoned that such statements only seek to drive fear into Guyanese of the consequence of any attempt at renegotiation.

Interestingly, Ram said the APNU+AFC’s renegotiation was conducted without a change in circumstances, while the incumbent Administration is adamant that it is powerless to even broach the question with the oil companies.

The Chartered Accountant said the apparent reliance on better contract management—as is often preached by the Vice President—in place of reasoned renegotiation may sound good. He noted, however, that such a statement seems designed to deceive especially when one considers the Addendum to the contract.

In conclusion, Ram said, “We may not be able to reverse the 2016 Agreement, but that should not mean that we have to prostrate ourselves at the feet of Esso, Hess and CNOOC, as our leaders are doing.”

He said the government should take the example of the APNU+AFC and demand renegotiation.

 

 

 

 

 

 

 

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