Damning revelation of amended royalty provision in Exxon deal exposes VP Jagdeo’s true colours

Sep 18, 2022 News

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– Govt. must quit being oil companies’ servants and secure more for its people – KN Publisher Lall

By Kiana Wilburg

Kaieteur News – Upon perusal of a document that revealed a critical fiscal amendment was made to the 2016 Stabroek Block Production Sharing Agreement (PSA) under the coalition regime, Kaieteur News Publisher, Glenn Lall, said it is unfathomable to think the PPP/C Administration would refuse to take similar action to secure more benefits for Guyanese.

The document in question pertains to Addendum No. 1 to the Stabroek Block Petroleum Agreement dated April 26, 2019. It states that former President David Granger and President of Exxon affiliate, Esso Exploration and Production Guyana Limited (EEPGL), Rodney D. Henson, accepted that the Stabroek Block deal allowed for the recovery of the two percent royalty and mutually agreed for this to be amended.

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 onto state that “the said royalty payment shall not be recoverable cost, in any manner or formulation under the Petroleum Agreement.”

Vice President, Dr. Bharrat Jagdeo during an interview with the KN Publisher last week, insisted that there are other weaknesses in the 2016 deal but the PPP/C Government will not enter into renegotiations. Jagdeo had said he is doubtful Exxon and partners would be open to doing so at this stage.

Jagdeo repeatedly stated that the contract would not be touched due to the government’s respect for the sanctity of contracts and the inherent Stability Clause of the PSA. That clause preserves the oil companies’ fiscal returns as provided for in the deal irrespective of any change in law.

Following the explosive revelation of the Addendum by Chartered Accountant, Christopher Ram, Lall said the proverbial cat has been let out of the bag. He said the document has exposed the true colours of VP Jagdeo and the Government by extension.

According to Lall, “The first Press Conference when I asked Jagdeo if royalty was recoverable, he carried us around in a circle saying the Guyana Revenue Authority (GRA) has to give him that information because he does not know. At the second Press Conference, he came and talked without being asked a question and said it is not being recovered.”

During last week’s interview with Lall, Jagdeo was keen to note that while the contract allows for the royalty to be recovered with the permission of the minister, same was not provided. GRA had also provided similar guidance.

Lall noted, however, that the addendum proves two things: indeed, royalty is not being recovered thanks to the actions of the Granger Government and changes can be made irrespective of the excuse of sanctity of contract.

“So Jagdeo has been selling this nation a jumbie story. Is he saying as the man heading this oil sector that he didn’t know or see this document? Not a soul brought it to his attention? Two years sitting at the helm of this oil sector and he is clueless about this? I refuse to believe that. Jagdeo knew all along that this contract can be amended in this fashion,” expressed the Publisher.

Lall said every citizen must ask themselves why the Vice President insists on painting Guyana as powerless when the Addendum proves the nation is not. “The question is why? Whose interest is this man looking out for?”

Lall also noted other critical changes that were made in spite of the existing provisions of the contract. The 2016 deal for example, states that the oil companies can self-insure. Guyana has said this will not be allowed, as such, stricter insurance provisions have been put in place using the environmental permits that have been issued for Exxon’s projects. Guyanese authorities have also instituted a Local Content Law which makes tougher demands on Exxon and its partners to prioritise the use of local goods and services.

Taking the foregoing facts into consideration, Lall said the Government must cease dancing to the tune of the oil companies and begin serving the interest of the people.

Like Ram, he called for the Government to make similar amendments that would ensure a better royalty percentage, put ring fencing in place and secure full liability insurance coverage from ExxonMobil Corporation.

In his column published by Stabroek News, Ram said the APNU + AFC Coalition suffered a barrage of criticism for what is often referred to as a lop-sided 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 drink 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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