Govt. says… ‘Guyanese must wait 14 years before change to ‘lopsided’ Exxon contract’

Sep 19, 2022 News

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– acknowledges successful renegotiation by APNU+AFC, but holds fast to sanctity of contract position  

Kaieteur News – Amid renewed calls for amendments to unfavourable provisions within the Production Sharing Agreement (PSA) between Guyana and the Stabroek Block partners, the Guyana government remains firm in its decision against any renegotiation of the 2016 oil contract.

A public statement from the Ministry of Natural Resource on Sunday, reiterated the government’s position that the 2016 PSA, shared between ExxonMobil affiliate Esso Exploration and Production Guyana Limited (EEPGL) and its partners will remain unchanged, while maintaining “sanctity” of the contract until the end of the agreement’s life cycle.

The ministry said that, “the government’s position has been and will continue to be, that the 2016 PSA shared between ExxonMobil affiliate Esso Exploration and Production Guyana Limited (EEPGL) and its partners, remains without a renegotiation in keeping with contract sanctity.” It said that notwithstanding this, the licensing for every new field to be developed since 2020 has seen significant improvements in both environmental and fiscal benefits for Guyana. “This will continue to be the trend for all new investments in the Stabroek Block until the contract renegotiation period is reached,” the statement clarified. Based on the production sharing agreement, the life cycle of the 2016 contract is 20 years. This puts the renegotiating period sometime around 2036, since the document would have been signed in 2016.

The government’s statement has come on the heels of revitalised calls for them to take Exxon and partners back to the renegotiation table given the “lopsided” provisions designed toward oil companies having a larger take from the country’s oil resources. A recently exposed document, an addendum to the 2016 PSA highlighted that two years after the A Partnership for National Unity + Alliance For Change (APNU+AFC) government signed the 2016 PSA, it brought Exxon and partners back to the renegotiating table, causing them to put into writing, assurance that they would not be recovering the two percent royalty that Guyana should be getting off the top, as owners of the oil resource. Despite weeks of intense exchanges more recently, about whether the two percent royalty is being recovered by the oil companies, the government nor the opposition had mentioned the document’s existence. Coupled with the fact that the 2016 PSA says that renegotiation of the contract is possible once the oil companies and government agree to revisit the document, commentators see the addendum as an act of that provision. This act has thus reignited their calls for the government to approach the oil companies for negotiations on possible changes.

The government has said however, that it is fully aware of the APNU+AFC amendment made to the 2016 PSA on April 26, 2019. It said that the amendment saw ExxonMobil Guyana being disallowed from recovering, through cost oil, the two percent royalty to be paid to the nation. Also, “the modification has been implemented and enforced through the mechanisms on the payments for royalties and cost recovery conditions, and the monitoring features which set out for the governance of the cost bank regarding the projects subject to petroleum operations,” the government ministry said.

It stated further that the recent reports in the media regarding the 2019 amendment to the PSA sets the precedent for the renegotiation of the entire contract between Guyana and ExxonMobil. “The government reiterates that the contract will remain fiscally unchanged for the country and investors’ benefits.” The ministry went on to say that the model PSA being developed by the government will be adapted for all new petroleum activities offshore Guyana – whether it be for exploration or production operations. This, the government said includes the upcoming competitive bidding round that it intends to host in the last quarter of this year and other commercially viable discoveries that will be made in other oil blocks.  “The 2016 model or any previous PSA will not be applied to any other oil block where a discovery has been made.”

The government said it is of the view, as has been underscored by His Excellency Dr. Mohamed Irfaan Ali and Vice President Dr. Bharrat Jagdeo that if specific fiscal considerations are amended in the current PSA, then that could impose unfavourable effects on current and future investments in Guyana, given the current world petroleum economy. “The Government of Guyana respects the investments made by the petroleum consortium in the Stabroek Block and will continue to work assiduously, through various agencies, on every additional license and environmental permit as has been done on Page 1 for Payara and Yellowtail developments. These projects have shown that with the prudent management of the oil and gas sector, Guyana can garner more economic and social benefits for improved intergenerational equity of the local economy.” The People Progressive Party (PPP/C) government insists that, “the model production sharing agreement (PSA) that is currently being developed will garner more economic benefits for the nation and its people.”

 

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