OGGN demands new PSA terms be applied to Stabroek Block

Nov 21, 2022 News

Kaieteur News – The Oil and Gas Governance Network (OGGN), a civil society organization, is demanding that the terms announced by Government for future Production Sharing Agreements (PSAs) be applied to the Stabroek Block where over 11 billion barrels of oil have already been discovered.

One of its members, Darshanand Khusial in a letter to the Editor, argued that while the oil companies can boast of Guyana being responsible for its sudden growth in shares and profits, Guyanese on the other hand, are struggling to make ends meet and living in poverty.

“Given this big disparity in the oil companies benefiting more from our oil than our people, our Politicians should be calling for the renegotiation of a fair deal. Except, many of them seem to be parroting the lines of the oil companies. Our Politicians are talking about the amount of money the oil companies have invested and the risk they are taking. That is a shareholder-centric view where greedy corporate executives worship money and have no respect for the environment or rule of law,” the OGGN representative argued.

He believes that if Guyanese Politicians cared about the interest of the people, they would immediately call for the enforcement of the Permits granted by the Environmental Protection Agency (EPA) that require full liability coverage. In fact, Khusial noted that the Politicians would demand that Exxon immediately stop pumping above the 120,000 barrels per day safe operating limit, since this is a much bigger risk in the absence of full liability coverage.

Additionally, the writer pointed out that a responsible Politician would also demand that oil companies pay taxes instead of trying to dodge the question of why many Western countries are considering imposing windfall profit taxes. He said, “Even the President of the United States has said Exxon needs to pay its fair share of taxes. There is a planned rollout of a 15% minimum tax by over a hundred countries yet Exxon pays no profit taxes in Guyana for the lifetime of the Stabroek Block PSA. The oil companies use our airports, harbours, and roads, which were paid for by Guyanese taxpayers. How is it fair that we have the average Guyanese worker who makes about US$4,000 a year pay taxes and the oil companies rake in billions of profits and pay no profit taxes?”
To this end, the Oil and Gas Governance Network urged that the terms of the new PSA announced by Government, after consultation with industry experts, be applied to the Stabroek Block.

“That new PSA calls for a 10% royalty, 10% taxes, cost oil limited to 65% of revenues, and has aspects of ring-fencing. That new PSA will only be applied to oil blocks that may not contain any oil. We demand that the recently proposed terms of the new PSA be applied also to the Stabroek Block PSA, which governs the profit sharing of 11 billion barrels of oil between Guyana and Exxon and its partners,” the civil society organization explained.

It reasoned that a baby born in the United States today will be one of the luckiest in the world and if Guyanese Politicians had the courage to press for a renegotiation of the lopsided Stabroek Block oil contract, a baby born in Guyana today would also have won ‘the ovarian lottery’.

Khusial pointed out, “A foreign observer analyzing Guyana’s oil resource per citizen would guess that a baby born in the last few years in Guyana would be one of the luckiest of the 8 billion people in the world. But the observer would be mistaken. It is approaching 3 years since we started producing oil but one of the key measurements of poverty shows that Guyanese are worse off.”
On November 3, Vice President Bharrat Jagdeo announced the terms that will be included in a new PSA which will be signed with the operators of 14 blocks to be auctioned soon in Guyana’s territorial waters. Some of the key provisions that will be featured in the new deal include a 10 percent royalty, 10 percent corporation tax and ring-fencing provision.

In making the announcement, the VP also clarified that the 14 blocks range from about 1000 square kilometres to 3000 square kilometres, with the majority of them being close to 2000 square kilometers.

Meanwhile, the Stabroek Block that covers approximately 26,800 square kilometres and is operated by Exxon and its partners- Hess and CNOOC- remains bound to a separate arrangement in which it pays a mere two percent royalty, no taxes and also recovers expenses from multiple projects from the revenue earned by development, in the absence of ring-fencing provisions. It must also be noted that Exxon is allowed to deduct 75 percent of costs from Guyana’s earnings upfront to cover its expenses while the new PSA would cap cost recovery at 65 percent of earnings annually.

Already, two political parties have expressed the view that the terms announced should be instituted for all future projects Exxon wants approved in the Stabroek Block.