Latest update January 18th, 2025 7:00 AM
VP Jagdeo ready to break oil contract for time limit on Exxon audits but refuses to do same for royalty and taxes
Kaieteur News – Tons of bricks would fall on Exxon. This is the punishment Guyana’s Vice President Bharrat Jagdeo said will be administered should the multinational oil corporation, ExxonMobil refuse to allow Guyana to audit its expenses after the two-year deadline, prescribed by the ‘binding’ oil contract, would have elapsed.
Vice President, Bharrat Jagdeo
Jagdeo issued this stern warning during his most recent press conference, while responding to a Kaieteur News article, in which the Economic Advisor to the Opposition Leader, Elson Low flagged that Guyana could lose millions for failing to conduct timely audits. https://www.kaieteurnewsonline.com/2023/04/23/guyana-risks-losing-hundreds-of-us-millions-with-delayed-audits-of-exxon-expenses-opposition/
The Economist’s statement was hinged on the provisions of the lopsided 2016 Production Sharing Agreement (PSA) which specifically states that Guyana has two years in which the audits can be conducted, after each calendar year.
In fact, the agreement even makes it clear that the oil company can dispose of its records after the two years period would have elapsed, unless an audit flags discrepancies which must first be resolved.
According to Annex ‘C’ Section 1.5 (C), “Without prejudice to the finality of matters as described in sub-sections 1.5 (a) and 1.5 (b) all documents referred to in those sub-sections shall be maintained and made available for inspection by the Minister for two (2) years following their date of issue providing, however, that where issues are outstanding with respect to an audit, the Contractor shall maintain documents for a longer period until the issues are resolved.”
Be that as it may, the country’s chief spokesperson on petroleum matters said Low’s contention regarding the audits was already laid to rest. He said, “We dealt with this issue when it came up several years ago; that it is true that the PSA says that the audit has to be completed within two years. So we had gone pass, even under the APNU period, the two years had passed even before they started the audit and we made it clear when we got in to office, no matter how long the audits take, ExxonMobil and the co-venturers, the companies could never use as an excuse, the timeline in there.”
He continued, “…because if they use that and don’t want to comply with the audit, they would have a ton of brick falling on their head on other issues on the regulatory side.”
While the government has decided to use the cards in its favour to get ExxonMobil to agree to extend the time limit for audits to be completed, it refuses to act similarly and exercise its authority, to mend other lopsided terms defined by the contract. Once amended, these provisions would earn more revenue for the country from the petroleum sector and would still be profitable for the oil giant.
For instance, Guyanese have been calling on the leaders to up the mere two percent royalty the country receives on its resources and subject the oil company and its affiliates to the tax laws of the country.
Other abusive provisions in the agreement allow Exxon to hold hundreds of US-millions for the state in clean-up and restoration funds that would be needed until production ceases offshore.
In the meantime, Guyana must pay whatever interest rate is attached to the cost of developing the resources in the Stabroek Block. The country has been advised to put a cap on this cost to prevent further exploitation of its wealth. In addition, citizens have been calling for a ring-fencing provision to be added to the agreement, which would allow for each oil project to pay for itself. Importantly, Guyana is yet to secure full liability coverage from the oil company for the Stabroek Block operations, even as production and exploration activities continues to increase.
The government has often related its position that the contract must not be changed and the terms must be adhered to, so as to uphold the ‘sanctity of contracts’.
This newspaper has highlighted that this principle has been violated in a number of instances already, as changes have been made to its terms outside of the agreement, yet this continues to be the excuse used by Guyanese leaders for not securing better financial terms in the Exxon deal. See link for examples. https://www.kaieteurnewsonline.com/2023/02/26/govt-overrides-sanctity-of-exxon-contract-with-major-adjustments-in-oil-licences-permits-new-legislation/
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