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Pres. Ali renews defence of lopsided Exxon contract after weighing options
– Says Guyana would have to pay company’s legal fees if Govt. challenges oil contract
Kaieteur News – Amidst all the criticism of the Stabroek block production sharing agreement (PSA) and calls for it to be revamped, President Irfaan Ali has admitted that the government at least seriously examined its options.
The President discussed the matter at a Guyana Shore Base Inc. (GYSBI) ceremony recently, where he said “We looked at it, we analysed it, we weighed the options.”
President, Dr. Irfaan Ali
In doing so, the President asked what Guyana would do about the “protracted international legal action” that could occur if Guyana challenges the contract.
“Exxon’s economy is strong. They can afford the best law firms. The country would have had to incur that cost,” Ali said.
The cost the President is talking about relates to provisions in the very PSA that is being criticised. As part of a list of expenses ExxonMobil, Hess and CNOOC are allowed to recover, the contract states: “All costs and expenses of litigation and legal or related services necessary or expedient for the procuring, perfecting, retention and protection of the Contract Area and in defending prosecuting lawsuits involving the Contract Area or any third party claim arising out of activities under the Agreement or sums paid in respect of legal services necessary or expedient for the protection of the interest of the Parties are recoverable.”
It goes on to state that if the legal services are rendered by the companies’ salaried or regularly retained lawyers, or lawyers working for their affiliated companies, such compensation is also catered for.
President Ali said in addition to this, that the government factored considerations such as investor confidence. He said a government should have a level of predictability that supports investors’ confidence. Though the government is not proud of the contract, Ali said it was an inheritance from another administration and the current government is obligated to honour it.
Ali said calls for the renegotiation of the deal have evolved into an “obsessive and paranoid” debate, and that he would not want Guyana to have a replay of the Amaila Falls situation.
The hydropower project was stalled in 2013 after the Opposition-controlled National Assembly refused to pass key environmental legislation required for the Inter-American Development Bank (IDB) to approve part of the required financing.
The People’s Progressive Party Civic (PPPC) had planned to source funding from Norway, China and the IDB. However, a Norwegian Ethics Council had raised questions about the involvement of the Chinese firm, China Railway Group Limited, in a significant corruption case. While serious questions of feasibility and transparency had lingered about that arrangement, President Ali said recently that it was political immaturity that caused the Amaila Falls project to fail. He also said that if the project was brought to fruition, Guyana would have been enjoying electricity at half the cost.
Multiple government officials have recently renewed their defence of ExxonMobil’s Stabroek Block agreement. ExxonMobil country President, Alistair Routledge also said that Exxon would not consider increasing the royalty to Guyana for future Stabroek block projects. He has also argued against ringfencing those projects.
The deal gives Guyana an industry-low 2% royalty. It also allows Exxon, Hess and CNOOC to take the advantage of a cost recovery ceiling of 75% of the oil they produce from the blocks, then split the profits 50/50 between them and the government. Vice President Dr. Bharrat Jagdeo has described the arrangement as sh*tty.
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