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Govt. expected to seek new Parliamentary Order to shield Exxon from 10% corporate tax set for oil companies

Mar 19, 2023 News

Kaieteur News – Time and time again, the Government of Guyana will have to make manoeuvres to prevent ExxonMobil subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), from being affected economically by changes in Guyana’s laws.

The company’s Stabroek block Production Sharing Agreement (PSA) is so precious that even certain changes in Guyana’s laws shall not affect it. In keeping with this principle, President Dr. Irfaan Ali’s administration is expected to go to Parliament for a special order to shield the PSA from a new tax law change that states companies operating under other petroleum agreements will have to pay – the new 10% corporate tax.

On the front page of the new model petroleum agreements which the government has released for public commentary, it is stated that the government anticipates the development of an amendment to the Corporate Tax Act to include the 10% income tax for oil companies.

The new tax is being implemented for the new agreements which will be issued at the end of the current oil blocks auction, and for all existing deals outside of the Stabroek Block.

The government has refused calls to renegotiate the Stabroek Block PSA on the grounds that contract sanctity should be observed, and that the stability clause prevents it from bringing Exxon to the table. The clause dictates that if Guyana implements any new law or tax code that affects the financial bottom line of the Stabroek Block co-venturers, Guyana will have to exempt them from the amendment or find a way to restore their economic benefit.

After it signed the 2016 PSA, the David Granger administration had to grant Exxon and its partners this exemption, in addition to contractors for other offshore blocks, so that Guyana’s tax laws would not apply to them.

See here for the 2016 DPI article about former Finance Minister, Winston Jordan, spearheading the approval of tax waivers for EEPGL: https://dpi.gov.gy/esso-exploration-gets-tax-break-as-oil-exploration-activities-continue/

Notably, while the ExxonMobil-operated Stabroek Block will be exempt from the requirement to pay the corporate tax, the Kaieteur and Canje blocks, also operated by Exxon, will be subjected to the new tax.

Vice President Bharrat Jagdeo recently affirmed that the government has effectively renegotiated all existing agreements except for Stabroek. When the new contracts are finalised, it is expected that the Kaieteur and Canje contracts will be overhauled and published.

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