Trade union calls for public inquiry into oil contracts signed with ExxonMobil

Oct 10, 2023 ExxonMobil, News, Oil & Gas

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– demands release of all information on Gas-to-Energy project

Kaieteur News – Amid growing calls for a renegotiation of the lopsided oil contract signed between the Government of Guyana and ExxonMobil, the Guyana Trades Union Congress (GTUC) is now calling for a public inquiry into all agreements signed with the US company by both the Janet Jagan and David Granger administrations.

This, the union said is to determine the differences so that action could be taken. It also called for the all mining and oil agreements concluded by the Ramotar Government must also be examined.

These and other proposals were made when GTUC, led by its General Secretary, Lincoln Lewis met with government leaders last week during the budget consultations exercise. Lewis told the gathering inclusive of Prime Minister, Mark Phillips and Finance Minister, Dr. Ashni Singh that the GTUC and its affiliates are pleased to submit their proposal, noting that a budget deals with the financial planning for the year based on Government’s policies and programmes within the parameters of the laws.

Lewis reminded the government that the engagement is not superficial but meaningful, consistent with Article 13 and 149C of the Constitution of Guyana, both of which speak to “inclusion” of groups and individuals in the management and decision-making processes of the State on matters that affect them.

Only last week this newspaper reported Former President, Donald Ramotar stating that he would have renegotiated the lopsided deal Guyana signed onto with U.S oil major ExxonMobil – underscoring that “it’s better to fight than not to fight at all.” Since the 2016 Production Sharing Agreement (PSA) was made public, there have been calls by locals as well as industry experts for Guyana’s leaders to bring Exxon back to the table and carve out a deal that would share equal benefits from the lucrative Stabroek Block. While President Irfaan Ali and Vice President Bharrat Jagdeo have taken a firm stance against renegotiating the contract, Ramotar revealed his disagreement during a discussion moderated by Dr. Asquith Rose. Ramotar described the current contract as detrimental, depriving Guyana of vital resources, and expressed his willingness to renegotiate for the country’s benefit.

The former head-of-state said, “I am one of the persons who believes that the contract is a very bad contract…that deprives us of a lot of resources.” As such, he continued by stating that he would have been in agreement to renegotiate the deal to seek more benefits for the country. To this end, Ramotar acknowledged the current administration’s reluctance to change the existing deal while noting that they have explored alternative avenues to maximise benefits for the nation.

ExxonMobil is the operator of the lucrative Stabroek Block, with its partners, Hess Corporation and CNOOC. Exxon and its co-ventures made its first discovery in the block back in 2015 and by December 2019 moved into production phase. The oil companies already sanctioned five US-multi-billion projects in the Stabroek Block with an investment of over US$50 billion that they will recover from Guyana’s oil resources. They are currently pumping about 400,000 barrels oil per day with hopes to reach one million bpd by 2029. Exxon is preparing to sanction its sixth oil project in the Stabroek Block.

Former Minister of Natural Resources, Raphael Trotman, who served under the APNU + AFC Coalition government between 2015 and 2020, was the one who signed the deal in 2016 with Exxon. The deal Trotman signed waives all taxes from the oil companies, gives Guyana a 2% royalty on its rich resources, and agrees to the oil companies recovering 75% of investments before the remaining 25% is shared, with Guyana receiving 12.5%. The arrangement, with the lack of ring-fencing, sees Guyana paying for projects that are yet to commence production activities. Each month, bills from future producing developments are added to the list of expenses to be cost-recovered by Exxon.

A few months ago, Trotman in his book titled, ‘From Destiny to Prosperity’ offered support to the government to renegotiate the lopsided Stabroek Block deal the country has with an ExxonMobil-led consortium. Trotman’s offer was refused by Vice President Jagdeo, and the calls by citizens for the deal to be renegotiated have fallen on deaf ears as President Ali and VP Jagdeo are adamant that they will not renegotiate the deal because of ‘sanctity of contract’.

WALES GAS PROJECT 

Meanwhile, the GTUC is also demanding that information for the Wales gas-to-shore must be made public and hearings
conducted before spending on them. The proposed gas-to-energy project which will use natural gas from the ExxonMobil-operated Stabroek Block to supply 300MW of power to the nation via the Guyana Power and Light (GPL) grid systems will not only increase the country’s debt but lead to an oversupply of power.  This critical perspective was outlined in a damning 33-pages report published by the Institute for Energy Economics and Financial Analysis (IEEFA) last week.

While the IEEFA report offers troubling insights on the dangers that lie with the gas-to-energy project, its authors have been keen to note that their analysis has been limited by the lack of public information and transparency, both on GPL’s electrical system and on the financing arrangements in place for the project. For citizens who are interested in demanding greater clarity from the Guyana Government on this project, they have offered a list of questions that could help increase transparency and accountability for the project. Those questions are as follow:

1. What are the terms of the pipeline agreement between ExxonMobil and the government of Guyana?
2. What is the estimated capital cost of the project?
3. Are the annual payments from the government of Guyana subject to adjustment for inflation or other factors?
4. Which party bears the risk of delays or cost overruns in construction?
5. Is there a transparent accounting for ExxonMobil’s profits as a builder of the pipeline and lender to Guyana for the money to build it?
6. How is Guyana’s decision to build the Gas-to-Energy plant related to ExxonMobil’s attempts to solve its flaring problem?
7. Is there an agreement between ExxonMobil and the government of Guyana that all of the natural gas supplied for this project will be free?
8. If not, what is the basis for the government’s assertion that it will be able to obtain 50 million cubic feet of free natural gas per day for the duration of the project?
9. What are the financial consequences, if any, to the government of Guyana if not all 50 MMcf/d of natural gas is used?

10.What are the anticipated terms of the US Ex-Im bank deal?

11. What alternative financing is the government of Guyana considering if the U.S. Ex-Im loan is not approved?
12. Has GPL quantified the level of investment needed to reduce losses to less than 10%?
13. How much will the government of Guyana have to spend to reduce rates by half?

In addition to the foregoing, IEEFA believes citizens should demand that all contracts related to the gas-to-energy project should be made public.

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• contracts, ExxonMobil, Government, oil, Trade union

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