Exxon wanted PSA signed before Govt. fully understood its Stabroek oil wealth

Oct 02, 2022 News

---

…‘Article 13’ cites Clyde & Co report findings

Kaieteur News – “The fact that since 2016 the volume of oil being borne out of the same agreement that envisaged a fraction of what is expected production is itself a call for renegotiation. If only the Government cared more about Guyana than its retention of power,” ‘Article 13’ believes that it would have made earnest efforts to seek more economical benefits for its citizens through its oil wealth.

The civil society body has been unrelenting in its support for the renegotiation of the lopsided 2016 Stabroek Block Production Sharing Agreement (PSA).  Moreover, it is of the firm belief that Government must renegotiate the oil contract with ExxonMobil and partners for the simple fact that the amount of oil today, is way more than what was expected at the time of the signing of the production sharing document. Dr. Yog Mahadeo, one of the organisation’s founders, recalled that a report by the last Government from Clyde & Co, highlighted that it was a deliberate move by the oil companies to have Guyana commit to the contract ahead of the Liza 2 results; and before the government actually understood the massive wealth that was still being discovered in the prolific offshore Stabroek Block.

Dr. Mahadeo reminded that in January of 2020, the Clyde & Co report, section 3.11, noted that the oil companies appeared to have placed a lot of pressure on the Government to sign the oil deal within a short space of time. That report, he continued, noted that “the reason given was related to commitments for drilling rigs.” The report revealed that EEPGL wanted to have the agreement in place “prior to LIZA-2 well results becoming fully known and understood by the Government,” Dr. Mahadeo related.

Taking note that a lot has been said about the need for renegotiation, he expressed concern that the Government has taken a position, and refuses to contemplate the necessary changes. He said, “Every assessment, every report, and every independent consultant have shared the same opinion that the PPP had before it got to power, to renegotiate. The PPP even voiced its dissatisfaction in the National Assembly in 2016. But the Ali-Jagdeo Government is focused on keeping Exxon in power!” Guyana, the activist added, has good reason to believe that the 2016 contract was signed “under duress and with misrepresentation.” He indicated too that the findings of the Clyde & Co report has adequate information to allow the government to understand the manner in which it was shortchanged. “But, simply put, there is an unwilling government that is in a rush to tell every investor that we are a weak nation that can be exploited,” Dr. Mahadeo concluded.

Despite Government’s hesitation, the anti-corruption group has vowed to continue its advocacy for the renegotiation of the 2016 oil contract.

In more recent commentaries on the issue too, experienced oil and gas stakeholders have been underscoring the many reasons why Guyana should be seeking a higher stake from its massive light, sweet crude.

But the Guyana Government has been holding strong to the “sanctity” of contract as the main reason for refusing to renegotiate the 2016 contract. Government has maintained that the wrong signal would be sent to foreign investors if Guyana were to turn on its commitment to the agreement. The administration has also pointed to a stability clause which it said prevents the changing of the 2016 agreement.

Former Environmental Protection Agency (EPA) CEO Dr. Vincent Adams noted, however, that another excellent reason why Guyana should renegotiate its oil deal with Exxon is because the company now has under that 2016 contract, some 11 billion barrels of oil equivalent, when it bargained with only 1.1 billion barrels of oil during the signing of the agreement. Dr. Adams told this publication just days ago, that in his 30 years spent at the highest level of the US Government negotiating and evaluating oil contracts that also involved the “Exxons of the world”, he would have seen many contracts, “…and changes are expected.” He said that one of the main things that always justifies changing a contract is when there is a major change, such as the significantly increased quantity of oil found after the 2016 agreement. Because change to a contract was nothing new, Dr. Adams said that every government had what was called a “change control board”. He said that with every change that comes in, it goes to the board and then we figure out what to do with it in terms of the contract…”

New-York based Attorney-at-Law Dr. Vivian Williams told the Kaieteur News that the government is making an economic mistake by not renegotiating the 2016 deal. In a recent interview, he told the newspaper that, “A country that has persistently encountered exploitation of its natural resources by foreign actors, should not elevate sanctity of contract above conscionability and fair dealing.” He said that at a time when the country is a magnet for foreign investment, he agrees that the government must send the right message. He said, however, that message should not be that investors who obtain unconscionable and unfair contract terms, whether through corruption or power asymmetry will be able to get away with it.

---

---