Jagdeo defends uncapped interest rates on Exxon’s investments and refuses to tell nation what Guyana is charged

Apr 16, 2023 News

Kaieteur News – Vice President, Dr. Bharrat Jagdeo defended a provision of the lopsided Stabroek Block Production Sharing Agreement (PSA) on Thursday, in the government’s quest to preserve it.

Vice President, Dr. Bharrat Jagdeo

The PSA is coming under scrutiny yet again for allowing ExxonMobil and its co-venturers to recover uncapped accumulated interest on loans taken to meet Stabroek Block expenses, without the prior approval of the Minister with responsibility for Petroleum. There are serious concerns about the potential abuse of this provision, as companies can take out loans with unreasonable interest rates to later recover them.

Jagdeo said, during his last press conference, that the issue is complex and reflective of the cost of raising capital. He argued that raising capital for the oil and gas industry is a difficult task, as many banks worldwide are moving away from supporting projects linked to fossil fuels. He used the example of the Joe Biden-led United States administration vetoing a loan that the Guyana Shore Base Inc (GYSBI), had tried to get from the Inter-American Development Bank (IDB) because it would support Guyana’s oil industry. The loan was for US$180 million for GYSBI’s shore base operations.

To Jagdeo’s mind, this demonstrates the challenge of raising capital for this sector. He said it is a complex matter that requires a nuanced approach.

The Guyanese public is concerned about this matter, which could see Guyana lose out on billions unreasonably. But Jagdeo indicated that the government wants to maintain momentum in the oil sector and attract investment to the country.

He said, “We don’t wanna kill the momentum. The moment you start a dispute to kill the momentum of the industry, everything dries up here for a while. And then you also can’t get the investment dollars that are so scarce now for this industry to flow, which is what we want to flow here so our local people can start doing better too.”

Importantly, the Vice President has refused to disclose what the amount of interest Guyana is paying to the oil company.

The PSA for the Stabroek Block is unique. Even though Jagdeo defended the provision, he said the government plans to “address” it in the new model contracts. He said the new contracts, with improved provisions relating to interest and other things, will be used for the auction blocks and the other current blocks outside of Stabroek.

It is rather peculiar that though Jagdeo has said many times that the PPPC government agrees that the Stabroek Block PSA is lopsided, he still fervently defended a provision that experts like former University of Houston Instructor, Tom Mitro says can open Guyana up to serious abuse.

The public may never know just how much Guyana is losing out from this interest provision as the interest rates remain hidden from public scrutiny.