Pres. Ali wants Guyanese families to benefit from “business” in oil sector

Apr 09, 2023 News

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…but refuses to implement taxes, ring-fencing, cap interest rates, etc. on Stabroek Block projects  

Kaieteur News – The Government of Guyana (GoG) has refused to budge on renegotiating the terms of the lopsided agreement signed with oil major, ExxonMobil to secure more benefits for Guyanese, even though several independent analysts have advised the nation to do so in its best interest.

Outside of touching the Stabroek Block agreement, the administration can also use its powers, if it so desires, to implement certain provisions that would increase the country’s profits. These include installing a ring-fencing provision, to ensure each oil producing field pays for itself, and by capping the interest rates on loans taken by the developer to extract the resources. The government can also decide to stamp its authority by subjecting ExxonMobil to the tax laws of the nation. Already hundreds of millions of US-dollars have been waived in tax exemptions by the Guyana Revenue Authority (GRA) for the oil giant. The tax body has already indicated that this annual figure will balloon as more projects come on stream.

Instead of tackling these initiatives in the Stabroek Block, where over 400,000 barrels of oil per day- on average- is currently being produced, the government has announced that it is now crafting a new strategy to ensure Guyanese families benefit from “business” in the oil sector.

It was President Irfaan Ali who made the revelation on Thursday while delivering a live statement that Cabinet has been dedicating hours of its time towards finalizing a model that ensure families across the country get involved in the petroleum sector.

According to the Head of State, “Every night, we spend hours debating, discussing ideas, trying to figure out a model through which we can have every Guyanese family involved in some aspect of the business of oil and gas; creating and working on a model that would give Guyanese a holding in some aspect of this business.”

He added, “That is what we worry about, that is what I spend my time (doing) and this government spends its time thinking about – advancing policies and ideas, understanding problems, analyzing global context and positioning Guyana as I said before to be among the top countries, if not the top country on food security, energy security and climate security.”

President Ali went on to say that in a World 2030 and beyond, there must be no conversation on climate and environment without Guyana being mentioned; well known for the prosperity of families. “There must be no conversation about energy security without Guyana being mentioned and the conversation of Guyana must be one in which the people are respected for their unity in which every family can have prosperity, one in which our people can enjoy the best possible health care and education.”

While the government is now seeking to ensure Guyanese benefit from local content opportunities, it has made it clear that it will not be engaging ExxonMobil to seek greater benefits out of the Stabroek Block.

When the agreement was signed with Exxon and its partners in 2016 by the former A Partnership for National Unity + Alliance For Change (APNU+AFC) Coalition government, the oil company had only discovered 1.1 billion barrels of oil in the Stabroek Block. Six years later, over 10 billion more barrels have been discovered in the country’s Exclusive Economic Zone, a major increase that some say justify the need for a renegotiation of the contract.

This was first highlighted by the former Executive Director of the Environmental Protection Agency (EPA), Dr. Vincent Adams in September last year.

Dr. Adams, during an online interview with GlobeSpan 24×7 told viewers that not only has Guyana uncovered more riches subsequent to the agreement being signed, but exploration activities are still ongoing while government has turned its face against seeking more value for its resources.

The former EPA Head is not convinced that the political excuse being used to not renegotiate the Exxon contract is valid. In fact, the scholar with years of experience in the oil and gas industry is confident that Guyana can get a better deal now that it has discovered 10 billion more barrels of oil in the Stabroek Block, where Esso Exploration and Production Guyana Limited (EEPGL), commonly referred to ExxonMobil Guyana is operating. He said that it is customary for changes in an environment to inform modifications to contracts in countries around the world.

According to him, “I have spent 30 years at the highest level of the US government and I negotiated (and) I evaluated contracts. That was part of my life and as a matter of fact, that was a main part of my life, and I’m talking about the Exxons of the world. I have seen many contracts you can think about and changes are expected and the one thing that you always have a justification for changing a contract is when there is a major change.”

The ruling People’s Progressive Party (PPP) government had promised to “review and renegotiate” the deal entered into by the former government; however, the party has now decided that it must maintain the agreement.

Citizens in Guyana believe that the present agreement only favours the oil company, as Guyana receives a mere two percent royalty for its sweet light crude and settled for 50 percent profit sharing, after Exxon takes 75 percent of the earnings to clear its expenses.

The deal that the oil company often brags about to its shareholders, also force Guyanese into paying their share of taxes, amounting to millions of US currency each year. This figure is likely to further balloon too as more operations come on stream.

In addition, the country is allowing ExxonMobil to operate offshore without full liability coverage in the event of an oil spill, which means that the risk is borne by Guyana. Meanwhile, a key provision that is lacking in the document is ring-fencing provision, which would avoid the oil company from using the petroleum revenue in one field to cover for expenses in another.

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• business, ExxonMobil, interest rates, Local Content, ring-fencing

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