Fmr. President Ramotar disappointed new PSA terms do not apply to Exxon’s new discoveries

Oct 23, 2023 News

Kaieteur News – Former Guyanese President, Donald Ramotar, has expressed disappointment that the current Irfaan Ali-led administration did not apply the new Production Sharing Agreement (PSA) terms to new discoveries made by American oil giant, ExxonMobil, which operates Guyana’s largest oil block, the Stabroek Block.

Former President Donald Ramotar

This publication previously reported the former president’s position in which he stated that he would have renegotiated the heavily criticized oil deal Guyana signed with Exxon. During that interview, Ramotar also argued that the terms in the new PSA should have been applied to the new discoveries made by Exxon in the Stabroek Block.

Ramotar expressed his disappointment during a recent televised interview, saying, and “The new regime that they’ve put in place for new oil findings by other companies — I am disappointed that they’re not going to apply it to many of the new discoveries by ExxonMobil within the area. It’s universally accepted that the agreement is extremely lopsided.”

In the new PSAs drafted under the People’s Progressive Party/Civic (PPP/C) regime, the administration aims to secure more fiscal benefits from the country’s oil resources. They increased the royalty from 2 to 10 percent and capped cost recovery at 65 percent per month. The new agreements also require petroleum companies to pay their taxes, in contrast to the agreement with Exxon, where Guyana pays the taxes of the Stabroek Block partners.

Despite calls from various sections of society for ExxonMobil to be subject to these modified terms on future projects, the PPP/C administration has stood firm that the company will not be required to contribute.

In a previous Kaieteur News report, Ramotar described the current contract with Exxon as detrimental to Guyana, depriving the country of vital resources, and he expressed his willingness to renegotiate the deal for the benefit of the nation.

ExxonMobil operates the lucrative Stabroek Block, alongside its partners, Hess and CNOOC. They began production in the block in 2019 and have already undertaken multiple multi-billion-dollar projects, aiming to produce a million barrels per day by 2029. Exxon is preparing to commence its sixth oil project in the Stabroek Block.

The original deal signed by former Minister of Natural Resources, Raphael Trotman in 2016 with Exxon, waived all taxes from the oil companies, giving Guyana a 2% royalty and allowing the oil companies to recover 75% of investments before sharing the remaining 25%, with Guyana receiving 12.5%. This arrangement forces Guyana to pay for projects not yet in production, adding to expenses each month.

Trotman had offered support for renegotiating the deal in his book, ‘From Destiny to Prosperity,’ but the offer was refused. The current government cites the sanctity of the contract as the reason for not renegotiating.

Following Kaieteur News’ publication of former President Ramotar’s stance on the renegotiation of the Exxon deal – President Ali criticized the former head-of-state during an address to attendees at a recent event.

It was during the Guyana-Canada Chamber of Commerce Maple Leaf Ball, when Ali took aim at Ramotar, although not naming the former Head-0f-State.

Ali said, “You know everybody is a specialist now. Whether you’re former president or president, you’re whoever, engineer or owner of Beharry Group, everybody specialized now.” He continued: “I don’t spend my time on negative energy but it’s tiring to listen to some of these guys. You want us to change the contract. You have an existing contract. You think that is how it happens. That is how the world operates. That you can just walk in one day and decide I had this contract with you. I’m changing it now.”

Ali contended that if such a move is taken Guyana can face legal repercussions from the oil major for not honouring the contract.

“This is not play thing, and some of these guys were policymakers. To believe that, you know, fanciful is nice and exciting and very popular to say we can change the contract. That is why we were very careful to say that we have to learn from the mistake and ensure that future contract does not make the same mistake and that is what we have done that is what you are doing,” President Ali said.

Furthermore, President Ali stressed the importance of maintaining investor confidence, explaining that sophisticated investors observing the situation might lose faith in the system if contracts were changed. Ali added that such move would cause investors to say, “you can’t depend on them [Guyana].”

President Ali acknowledged the challenging hand that Guyana had been dealt in relation to the Exxon deal, but emphasized the administration’s commitment to ensuring that future dealings were more favourable to the country.

He said, “But everybody wants a front page now. Some of them had plenty years to change it. But they want a front page now. The easiest thing to get on the front pages here, I suppose is changing the contract. For God heaven’s sake, I wish if it was a better contract. All of us wish that.”

Moreover, President Ali urged a realistic approach over opportunism.

While President Ali has maintained a firm stance against renegotiating the existing PSA signed in 2016, the debate rages on. Calls from locals and industry experts have seen urges for Guyana’s leaders to reopen negotiations with ExxonMobil and its partners, Hess Corporation and China’s CNOOC, to ensure more equitable benefits from the lucrative Stabroek Block.

Donald Ramotar, e Stabroek Block partners, Former Guyanese President

1 thoughts on “Fmr. President Ramotar disappointed new PSA terms do not apply to Exxon’s new discoveries”

Mohamed Khan October 23, 2023 at 7:58 pm

The people of Guyana get more than the three companies together.Also there are many thousands of Guyanese directly or indirectly invested in Exon

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