Jagdeo ignored threats of driving out investors with local content laws, but refusing to adopt same principle on contract renegotiation

Feb 21, 2023 News

Kaieteur News – “Not having done it elsewhere in the world in Exxon’s global experience over the last many years is not reason for not doing it now in Guyana. If it’s necessary to promote sustainability, we are going to ensure that that happens.”

This was the assurance given by Vice President Bharrat Jagdeo during the opening of Guyana’s Energy Conference on February 14, 2023. The four-day event was hosted at the Georgetown Marriott Hotel, under the theme ‘Harnessing Energy for Development’. VP Jagdeo was invited to speak on Guyana’s Energy Policy when he requested to deviate from the subject to address the country’s progress from last year’s event and insight into the driving factors of government policies.

Vice President, Bharrat Jagdeo addressing the Energy Conference

The former Head of State said in his presentation that Guyana is cognizant of the fact that the country holds world class resources, also referencing the words of a previous speaker, President of ExxonMobil Upstream Oil and Gas Company, who said there must be a partnership for investors to make money as well as for the people of the country to benefit.

At the same time, Jagdeo said government is often told by the oil companies that they have “never done that before and we didn’t do that elsewhere”. For instance, he explained, “When we spoke about Local Content Legislation, they were not very pleased with that and we were told that it could lead to shutting down operations here…and we have done so and it didn’t shut down the industry and it’s driving more local business here.”

Delegates applauded the leader for this bold step, even as he continued to point out that a similar issue was evident when government wanted to introduce a fine for flaring of associated gas offshore during production activities.

“We had the same issue here when we were trying to redo the Environmental Permits and we were told, well we have never had to pay a carbon tax globally for flaring- because we have a no flaring policy and any flaring beyond the initial period now, it starts at $45 per tonne- and we were told we never did that before and we put it in the permits and the companies have agreed to it and they have paid when they flared beyond the allowable limits,” Jagdeo boasted.

Similarly, the Vice President said Exxon cried that supplying the country with free gas may “distort the market and send the wrong signals” however, government still managed to strike an agreement for the company to supply the gas free of charge.

According to Jagdeo, “the gas is free…there is a gas sales agreement but that’s the vehicle through which we are paying for the infrastructural cost on the pipeline.”

It was against this backdrop that he made it clear “not having done it elsewhere in the world in Exxon’s global experience over the last many years is not reason for not doing it now in Guyana.”

He said the relationship with the oil companies has not been easy but “once the government knows clearly what it wants out of this relationship” they have been accommodative. Even though Jagdeo said government did not heed to threats of Local Content shutting down the oil sector, his party has refused to change the lopsided Production Sharing Agreement (PSA) signed with Exxon in 2016, over fears that the oil company would cease operations here.

The People’s Progressive Party (PPP) said in its 2020 Elections manifesto that the administration would engage in better contract administration or renegotiation of the oil deal, however after assuming office, the group now believes in “sanctity of contracts” to ensure investor confidence.

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Conference, ExxonMobil, Local Content, PSA, renegotiation

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