Govt. releases unsigned contract for sale of country’s crude

Dec 11, 2022 News

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Kaieteur News – The Government of Guyana on Friday released an unsigned contract for the sale of Guyana’s oil.

The release of the contract follows mounting pressure from stakeholders to see the terms and conditions under which BP International Limited, a subsidiary of British Petroleum, will sell the country’s oil.

The Government announced in November that the British Company was awarded a one-year contract to sell Guyana’s oil.

However, a perusal of the contract published on the Ministry of Natural Resources website shows that no signatures have been affixed.

Stakeholders began questioning the deal after the Ministry of Natural Resources announced via a statement that no marketing fees are being charged by the Contractor. The Ministry failed to state the benefits that the British Contractor would derive from the sale of the country’s crude.

According to the unsigned document, the remuneration of the Service Provider pursuant to Clause 6, which states that the Service Provider’s remuneration shall not exceed the Contract Price and shall be a fixed lump-sum including all Sub-contractors’ costs, and all other costs incurred by the Service Provider in carrying out the Services described in the Special Conditions of Contract (SCC), shall constitute the Service Provider’s sole remuneration in the performance of this Contract or the Services.

The unsigned document states that the Service Provider “shall not accept for their own benefit any trade commission, discount, or similar payment in connection with activities pursuant to the performance of this Contract or to the Services or in the discharge of their obligations under the Contract, and the Service Provider shall use their best efforts to ensure that the Service Provider’s Personnel, any Sub-contractor, and agents of either of them similarly shall not receive any such additional remuneration.”

Further, the document posted on the Ministry’s website states that “neither the Service Provider nor its Sub-contractors nor the Personnel shall engage, either directly or indirectly, in any business or professional activity, that would conflict with the activities assigned to them under this Contract.”

“The Service Provider has an obligation and shall ensure that its Service Provider’s Personnel and Sub-contractors shall have an obligation to disclose any situation of actual or potential conflict that impacts their capacity to serve the best interest of the Client, or that may reasonably be perceived as having this effect. Failure to disclose said situations may lead to the disqualification of the Consultant or the termination of its Contract,” the document says.

On Saturday, Patterson in an invited comment told Kaieteur News that something was amiss with the missing signatures on the contract.

“I don’t see why you would release an unsigned contract. Obviously the signed contract could differ from the unsigned contract. Every contract that the Coalition released was the signed version that was lodged in the Deeds Registry,” he pointed out.

The former Minister of Public Infrastructure is adamant that an unsigned contract is equivalent to not releasing a contract. Efforts to contact subject Minister, Vickram Bharrat were futile.

Following the announcement of the contract, the Alliance For Change (AFC), the third largest political group in the country demanded that the contract be released so that Guyanese can determine the benefits of the deal to the contractor for themselves.

Shadow Minister of Natural Resources, David Patterson had explained, “The normal procedure for such marketing services, the company would normally either charge a commission on every barrel that is sold. So you would have seen bids there where persons were saying four US cents, one US cent per barrel and obviously when they sell it they collect that commission and then remit the rest to the government or as in BP’s bid they would submit it but it would be charging a fixed base fee…those are the two known methods.”

The former Minister of Public Infrastructure was keen to note that this could mean the shipment price could reach US$100,000 per transaction. An adamant Patterson said that no company works for free and the Government must make public its agreement with BP International.

Meanwhile, Kaieteur News had reported that BP International Limited will be marketing Guyana’s oil from the Liza Destiny and Liza Unity Floating, Production, Storage and Offloading (FPSO) vessels, currently producing about 360,000 barrels of oil per day.

The firm beat 13 other firms to win the contract. According to tender documents, BP International will be responsible for providing all functions of marketing, assessing regional and global demand centres, selecting customers and making appropriate transportation arrangements, providing support and guidance to the client in all operating and back-office responsibilities of managing these crude sales. It will also be expected to facilitate timely and cost efficient crude oil operations; and support the client in the continued introduction of the grade to multiple geographies and refinery systems.

In addition to the foregoing, the Ministry of Natural Resources said BP will also be required to provide benchmark performance comparisons of prices paid for the client’s crude while working closely with the client in understanding the behaviour and yields of the Liza blend and how these affect pricing differentials.

Kaieteur News previously reported that Aramco Trading Limited (ATL), the London-based trading subsidiary for the State controlled Saudi Aramco, had inked a one year contract with the Ministry to market Guyana’s crude entitlement from the Liza Phase One Project. That contract came to an end in October 2022.

ATL was among 15 bidders in the Brent-linked tender for Guyana’s light sweet Liza grade, and “was identified as the lowest compliant evaluated bidder at the price of $0.025/bl,” the Ministry had said.

As for the Liza Unity crude, Government has been doing its own marketing. At least two cargoes were already sold but little is known about the buyers and how they were selected.

Importantly, sales agreements for the country’s share of profit oil have not been made public. The International Secretariat for the Extractive Industries Transparency Initiative (EITI) has since called for Guyana to do better on this front.

It has also pointed out that the country is yet to declare consistently, information pertaining to the volumes of oil collected in accordance with the profit-sharing split in the Stabroek Block Production Sharing Agreement (PSA), alongside the identity of the buyer for each oil cargo.

Furthermore, the EITI had flagged Guyana for not publishing descriptions of the process for selecting the buying companies, the technical and financial criteria used to make the selection, and any material deviations from the applicable legal and regulatory framework governing the selection of buying companies.

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