Jagdeo changes tune to avoid renegotiation with Exxon

Jun 02, 2023 News

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– says any such move will affect momentum of projects   

Kaieteur News – The ‘sanctity of contract’ principle was an excuse widely used by the People’s Progressive Party (PPP) administration to avoid renegotiating the lopsided agreement signed with American oil giant, ExxonMobil. Government also said before that such a move could chase investors away. Two weeks ago when the oil company held a press conference at its Kingston, Georgetown office, it made it clear that it would not turn its back easily on Guyana, given the vast resources discovered offshore.

President of ExxonMobil Guyana, Alistair Routledge was at the time responding to a question from Kaieteur News when he made that point. Now that the company has essentially said there is room for changes to the deal for Guyana to get more, the government is still not prepared to go after better terms for its people. Vice President Bharrat Jagdeo during his weekly press conference yesterday said that asking for a renegotiation at this point would affect the pace government has worked to build to extract the resources.

He explained: “my concern has been about the killing of the momentum and this is where we have a fundamental disagreement…two things we have explained already, net zero is already upon us…we have the big countries, particularly those who are producing oil, they don’t want new entrances in the market because they have (to) preserve their monopoly.”

At the same time, the VP said there is a climate group insisting that Guyana does not touch the resources discovered offshore. To this end, he said, “As the years pass by, it’s getting even harder to do so.” Jagdeo explained that the President Joe Biden administration just passed a new law that will place green technology developed in other parts of the world at a disadvantage. He said as part of the act to raise the debt ceiling in the country, the United States is now going to allow oil and gas exploration in a part of the state they had initially prevented.

Jagdeo said: “we have to look out for our own here in this country…they don’t realise that the people who explore for the oil now, early enough and actually start the production there is a tiny window.” In further making his point, the former President noted that Suriname and the other countries are having a hard time to move to a stage where there is a commitment invest.

In fact, he noted that Guyana is still an attractive zone, so government has been capitalising on this by launching an auction and pushing for new Floating Production Storage and Offloading (FPSO) vessels on come on stream.

He said: “There would be a time in the future, you would not be able to raise money because of ESG (Environmental Social Governance) and because of what shareholders are pushing for many of these companies too to switch to renewable energy that you may not be even able to do this.”

Jagdeo said it is important to understand the dynamics of the industry and appreciate the global trends before taking a national position. “It can’t be just about a one issue position or it’s not a one variable solution. There are multiple variables that have to be all combined…but right now, the key thing is getting the investment dollars to flow,” he said.  Jagdeo said 85 countries are now auctioning oil blocks with the hope of getting oil and gas companies to invest. As such he said, “What we are worried about in spite of all of what you just said is that it would kill the momentum. Momentum is everything and it is the momentum that we are worried about and it’s hard to pick up momentum back again.”

The VP also pointed out that increasing the momentum does not mean the government would be laxed on other aspects of the industry. In fact, he pointed out that the government has strengthened the Environmental Permits while the country’s capacity to also fight an oil spill has been vastly increased with a capping stack in country, which would plug a leaking oil well. He said, “So this is my position on it. It’s the momentum that I’m worried about. Not so much that what any negotiation would do. It will definitely kill off probably the movement on the other FPSOs that are planned.”

Routledge during a press conference on May 19 was at the time being pressed by this newspaper on returning to the table with the country’s leaders to discuss more fiscal benefits for the nation, in light of the continued success of the oil block- which happens to be the country’s largest – when he initially started off by describing the contract as “competitive”.

Routledge also boasted that this is the “most valuable contract the country has”, therefore, the country ought to focus on how to make it work. In fact, he explained, “The moment we try to change the contract, the investment will stop, the local content development will stop.”

Kaieteur News immediately sought clarity from Routledge on whether he believes ExxonMobil Corporation would walk away if the administration asks for a 10 percent royalty for instance. To this end, he explained, “History will tell you that when disputes start about contracts, investments stop, investors hate uncertainty.” He was however told that the question was directly about Exxon and if it is prepared to pack up and leave Guyana over such a dispute, especially since it has already made over 30 discoveries since 2015.

In response, Routledge explained, “No company walks away easily. I have lived through Venezuela in 2004, 5, 6, 7 when the government imposed a new contract on our operations and we worked extremely hard to avoid that but the government created an environment where we couldn’t stay and it ended up in international arbitration and in the meantime, no further investment, you can see what happened to the country, it has a huge endowment of resources, but sadly has lacked investment for many years and has moved from a production of 3 million barrels to less than 600,000 barrels of oil per day.”

 

 

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• changes, momentum, oil, renegotiation, tune

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