Govt. distracting citizens with oil blocks auction instead of demanding 20 % royalty, taxes from Exxon – Fmr. Petroleum Advisor Dr. Jan Mangal

Sep 30, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – Former Presidential Advisor on Petroleum, Dr. Jan Mangal recently impressed upon the need for the Guyana Government to be laser-focused on rectifying the unfair provisions in the Production Sharing Agreement (PSA) governing the ExxonMobil-led Stabroek Block. In that concession alone, Exxon has made over 33 significant discoveries, unlocking over 11 billion barrels of oil resources. To date, the oil giant has received regulatory approvals for five projects which will produce over 3 billion barrels of oil with the lion’s share going to Exxon and its partners.

Over the last seven years, industry experts have urged authorities to change some of the lopsided provisions of the contract which include a mere two percent royalty and a tax free ride. Dr. Mangal in his latest critique, said getting a fair deal for the exploitation of those resources ought to be the government’s focus instead of distracting the citizenry with the hosting of an auction for 11 shallow water concessions and three deepwater blocks.

While a transparent auction is the best way for countries to benefit from their natural resources, Dr. Mangal posited that the recent auction in Guyana was not necessary. In stinging commentary published on September 29, 2023 by weekly publication, Latin American Advisor, Dr. Mangal said, “The recent auction in Guyana was not necessary because Guyana does not need to find more oil.”

He said a small country like Guyana with less than a million people can be transformed with a fair share of the revenue from 500 million to 1 billion barrels of oil from the Stabroek Block over 25 years of production.  “There is no need for 11 billion barrels to be burned and further exacerbate the climate crisis,” the energy consultant said.

Further to this, Dr. Mangal said, “Why are politicians not focused on getting a fair deal for the country by negotiating a fair share of the revenue from the Stabroek Block?  The royalty should be increased from two percent to 10-20 percent, and the oil companies should pay tax.”

Dr. Mangal also questioned why Guyana’s politicians have not created independent authorities to manage resource exploitation in the interests of the country, as opposed to the current situation, which favors the foreign oil companies.

He also remarked, “…Why are politicians not focused on finally transforming Guyana into being well-governed and equitable, and reverse their track record of 50 years of mediocrity, mismanagement and corruption?”

Dr. Mangal added, “Most politicians in Guyana, on all sides, are driven by self-interest and power, and are quite happy to take orders from foreign players, instead of doing their job of representing the people of Guyana.”

Guyana’s first oil blocks auction was launched last year December by President, Dr. Irfaan Ali. Following the close of bid submissions on September 12, 2023, the National Procurement and Tender Administration Board (NPTAB) office revealed that six companies submitted offers for Guyana’s inaugural auction for 14 offshore oil blocks. According to the NPTAB, the firms bidding for the Ministry of Natural Resources project are: Total Energies EP Guyana B.V, Qatar Energy International E&P LLC, & Petronas E&P Overseas Ventures SDN BHD (Malaysia); Delcorp Inc – Guyana, Watad Energy, Arabian Drillers (Saudia Arabia); Exxon Mobil Guyana Limited, HESS New Ventures Exploration Limited, and CNOOC Petroleum Guyana Limited; Liberty Petroleum Corporation (USA)and , Cybele Energy Limited (Ghana); Sispro Inc. (Guyana), and lastly International Group Investment Inc. (Guyana), in joint venture with Montego Energy  SA (London).

Prior to the auction being held, government was keen on having the Petroleum Activities Law in place and it has finalized the new Model Production Sharing Agreements that will govern future awards of deepwater and shallow water concessions.  Kaieteur News previously reported that 11 of the oil blocks on auction are located in the shallow area and three are in the deepwater zone. They range between 1000 square kilometres to 3000 square kilometres with the majority of them being close to 2000 square kilometres. Government has not yet disclosed the details of the bids submitted but pledged to do so after careful evaluation of those documents.

Winners of the new blocks will be expected to pay a 10 percent royalty and a 10 percent corporate tax. The cost recovery will be capped at 65 percent in a given year, while profits will be shared 50/50 between the parties. For shallow water blocks, companies have to pay a minimum of US$10 million while a minimum of US$20 million is set for deep water concessions.

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• Dr. Jan Mangal, Government, Guyana, International Energy Consultant, Production Sharing Agreement (PSA)

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