Guyanese must up pressure on Exxon to amend lopsided deal

Oct 30, 2022 News

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…Govt.  has duty to hold off approvals until better terms are secured – Ramjattan

By Davina Bagot

Kaieteur News – As American oil major, ExxonMobil Corporation continues to revel in over US$40B in earnings made during the first nine months of 2022—no doubt fuelled by Guyana’s sweet light crude and the lopsided Stabroek Block deal that benefits its shareholders—the Alliance For Change (AFC) believes that now is the time for the 2016 Production Sharing Agreement (PSA) with the company to change.

In fact the Party’s leader, Khemraj Ramjattan during a media briefing on Friday urged that Guyanese take a united position to ‘pressure’ the oil company into ensuring locals get more for their natural resources.

Ramjattan in response to a question from this publication explained that the changed circumstances in the Stabroek Block, where the discoverable resources have now increased by over 10 billion barrels of oil, mean that the agreement between the two parties must change. Added to that he reminded that the People’s Progressive Party in its 2020 elections manifesto said it would engage in renegotiation.

The Party Leader was keen to point out that while the oil company would do all that it takes to ensure Guyana remains bound to that deal so as to guarantee its cash flow, government’s efforts must match the global conglomerate’s to haul them before the table.

According to him, a method that can be used by the Government to secure a better deal would be to simply not grant new licenses, adding that the nation must stand united on this front. To this end, he said, “Pressure must come also from the public and pressure must also come from lobbyists groups that is gonna ask powerful nations that the Guyanese deserve a better deal.”

Presently, oil is being produced in the Liza One and Two fields. A third project, Payara is expected to come on stream next year which will take the total oil production up from the present approximate 300,000 barrels per day to about 500,000 barrels per day.

On April 1 of this year, the Environmental Protection Agency (EPA) gave oil giant ExxonMobil, the green light to start up oil production at its fourth development, Yellowtail. Less than two weeks later, Exxon applied to the agency for a Permit to start extracting oil from its fifth project, Uaru+.

The oil company’s Consultant, Acorn International, is conducting an Environmental Impact Assessment (EIA) for the fifth development in the Stabroek Block. After its two most recent discoveries last week, the total discoveries for the prolific Stabroek Block reached 35. It is estimated to hold over 11 billion barrels of oil.

In the past, various organizations have voiced their support for Guyana when it comes to securing better terms from the oil company. The PPP on the other hand is adamant that the 2016 oil contract must not be touched to maintain ‘sanctity of contracts’.

Already, several Attorneys have shut down this excuse, noting that the agreement does allow for changes to be made.

For instance, International Lawyer, Melinda Janki pointed out, “when we hear people yapping about ‘sanctity of contracts’ and that is the reason for not changing the contract that is of course complete nonsense. ‘Sanctity of contract’ does not mean that the contract cannot be changed by the parties to the contract. ‘Sanctity of contract’ means that one party cannot unilaterally suddenly decide that he or she, or it doesn’t like these terms so they are not gonna do it. It’s two different things…”

The Lawyer was keen to note that the 2016 PSA, specifically at Article 31.2 states, “This agreement shall not be amended or modified in any respect except by written agreement entered into by all the parties which shall state the date upon which the amendment or modification shall become effective.”

Additionally, New York based Guyanese Lawyer, Dr. Vivian Williams, in an invited comment told this publication that both the former and present Governments have been misusing the sanctity of contract doctrine to avoid renegotiating the lopsided deal.

According to him, “What is playing out is the misapplication of a legal doctrine to avoid acting in the nation’s best interest. Because the ‘sanctity of contract’ doctrine does not apply to the consensual process of contract renegotiation, common sense should have shut down that argument before it was even made.”

The Lawyer added, “Simply put, ‘sanctity of contract’ means, an agreement made freely, knowingly, and fairly by competent parties, must be kept. It operates as a fundamental principle of contract law, reflected in principles such as pacta sunt servanda, well unknown to state actors. Therefore, despite sovereignty, a state is liable if it unilaterally breaches an agreement.”

However, Dr. Williams contended that the renegotiation of a contract is a common practice that does not collide with the sanctity of contract doctrine. He said it involves the revisiting of problematic terms of an agreement by parties who may or may not reach agreement on a revision. Therefore, Dr. Williams argued that sanctity of contract and renegotiation of contract are parallel processes that compliment rather than offend each other.

In the meantime, former Head of the Environmental Protection Agency (EPA), Dr. Vincent Adams said the major changes in the Stabroek Block validate the calls for a renegotiation of the deal. He was keen to note that when the deal was inked in 2016, Guyana had merely discovered approximately 1.1 billion barrels of oil, but fast forward to six years later, the country has found more than 10 billion more barrels of oil with exploration activities still ongoing.  He said that it is customary for changes in an environment to inform modifications to contracts in countries around the world. In addition to this, the former EPA Boss highlighted the fact that modifications have already been made to the 2016 contract, which further shows the invalidity of government’s ‘sanctity of contracts’ argument.

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