President Ali wants private sector and lending institutions to “speak up” against those who calls for renegotiation of Exxon deal

Feb 12, 2023 News

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By Shervin Belgrave

Kaieteur News – President Irfaan Ali on Friday told members of the Private Sector they that must “speak up” against calls for the lopsided Stabroek Block Oil deal to be renegotiated.

The President was at the time delivering the feature address at a commissioning ceremony hosted by Guyana Shore Base Inc. (GYSBI) for two new heavy lift Berths at its Houston, East Bank Demerara (EDB) facility.

Despite acknowledging on many occasions that Guyana’s deal with ExxonMobil’s subsidiary Esso Exploration and Production Guyana Limited (EEPGL), for its lucrative Stabroek Block is a bad one, Ali used the platform to iterate that his government is never going to change it.

President Ali in his speech even went a step further to tell the private sector that they must “speak up” against calls by civil society bodies and the Opposition to renegotiate the contract because it has the most to lose if the deal is changed.

“…We could have disavowed [renegotiate] the agreement [contract] as I said but that would have brought an immediate halt to production. Robin [Executive Director of Muneshwar Limited and Partner at GYSBI] what would you have done? All the companies – and you guys have to start speaking too – all the companies that would have invest and continue to invest what would have been the situation? Lars [Lars Mangal, CEO of Total Tec] what would have happened to all of the people you are training, the hundreds of Guyanese now doing oil and gas as their career, the banks that are lending the companies that are adding value? You guys need to start speaking up”, Ali told members of the Private Sector while adding that it is not a matter for the government but a national one.

Last year, Opposition Leader, Aubrey Norton said that there is an avenue where changes can be made to the contract. Norton said last October that “The contract provides a mechanism to engage Exxon to make whatever changes are needed. If you are interested in calling it renegotiation, feel free. What I am saying to you is that there is a mechanism to make changes and Government should utilise it.”

Although the contract might provide a mechanism for changes, President Ali believes his government is obligated to “act in good faith by honouring it.”

“We understand that we are obligated to act in good faith in honouring it. We are a responsible government,” the President said while emphasizing that if his government were to “dishonour the agreement” then it would face severe consequences.

“It’s not far-fetched, look around us, our neighbours… about agreements that were not honoured and see the consequences”, Ali said.

Among the consequences, the President said are capital flight and loss of national credibility that can hinder the future of a country.

While the President now has a different perspective on renegotiation, it must be noted that his party’s promise to renegotiate the deal still remains on page three of its 2020 Elections Manifesto promises.

As part of its plans, the party promised “To ensure that our oil resource is managed responsibly, the PPP/C will: immediately engage the oil and gas companies in better contract administration/ re-negotiation.”

Vice President, Bharrat Jagdeo, the Party’s General Secretary is also on record while serving as the Leader of the Opposition, promising to renegotiate the Exxon deal.

Jagdeo at the time argued that the then A Partnership for National Unity + Alliance For Change (APNU+AFC) Coalition government “sold” the country to “foreigners” because that administration failed to include ring-fencing to shore up profits from the 2016 deal.

“They sold us out to the foreigners. The oil companies, every time there is a find out there, our people should be sad because nothing comes our way. We are gonna renegotiate those contracts because that’s not what we had in mind,” Jagdeo said.

While Ali wants to maintain the country’s national credibility by honouring the lopsided contract, Guyana may never be able to reap the full 50 percent profit from any of the projects being developed in the Stabroek block because of the absence of a key provision called ring-fencing.

Kaieteur News reported on Friday that Guyana has managed to pay back ExxonMobil and its partners, Hess and CNOOC, approximately US$4 billion for developing the Liza Phase One offshore project.

Under normal conditions, with ring-fencing, the country would have now been reaping 50 percent of the profits from that project, but in the absence of this key provision, Guyana will continue to receive a meagre 12.5 percent in profits.

Ring-fencing is a guarantee that funds allocated for a particular purpose will not be spent on anything else. With the absence of ring-fencing in the contract funds from Liza Phase one will be spent on costs for other projects being developed by Exxon.

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• Contract, ExxonMobil, oil block, President Ali, Private Sector, renegotiation

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