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Govt. shows outstanding courage with Maduro but weak when facing Exxon – Chris Ram
Kaieteur News – To its credit, the Guyana Government has displayed outstanding courage, bravery and embrace of love of country when countering the absurd efforts of Venezuelan President, Nicholas Maduro to seize the Essequibo Region. But when it comes to ExxonMobil, the whole approach is different – weak, spineless and an embrace of the oil companies which should be guests of the country and the holders of licences to participate in the development of the patrimony of the people. This is the essence of arguments recently made by Chartered Accountant, Christopher Ram in his 116th column published by Stabroek News.
Chartered Accountant, Chris Ram
In that commentary, Ram expressed his disappointment that the Irfaan Ali-led Administration refuses to ring-fence production projects from exploration projects in the Stabroek Block which results in Guyana losing billions of dollars in revenues. Readers would recall that ring-fencing is used as a tool to ensure that exploration projects are financed by funds independently provided by the oil companies: that there is no crossing over of revenues from a successful project to cover the exploration expenses of another.
In the absence of ring-fencing, Ram showed that Exxon can redirect oil profits from existing projects which should be shared between the oil companies and the Government to exploration and production programmes under licences from the Government. Ram lamented that this is another raw deal for Guyana since the oil companies now benefit from that money without any loss or any return from that type of abuse. According to Ram, Guyana essentially makes itself an investor for Exxon’s projects but has no seat at the table nor does it have any say in decision making for those projects.
Ram expressed distress that top finance experts in the Government do not recognise that even if exploration is successful, there is a time value of money, and that Guyana should not be financing exploration in the first place. He also said these experts should recognize that the risks to the oil companies are halved when Guyana’s oil profits repurposed and that the country is still bound to give all kinds of benefits to the oil companies, including paying their taxes. Noting that this amounts to a de facto rearrangement of the contract, Ram asked rhetorically why the government does not correspondingly reduce by 50%, the value of the taxes which it pays out of its share of profits.
Ram also noted the abhorrent effect of the stabilization clause in the Production Sharing Agreement (PSA) that governs the Stabroek Block. Ram said this PSA essentially strips Parliament, a key vessel of Guyana’s statehood, of its most essential power and function, and that is the power to “make laws for the peace, order and good government of Guyana.” (Article 65 of the Constitution).
Referencing the said clause, Ram said sub-Articles .1 and .2 state: “Except as may be expressly provided herein, the Government shall not amend, modify, rescind, terminate, declare invalid or unenforceable, require renegotiation of, compel replacement or substitution, or otherwise seek to avoid, alter, or limit this Agreement without the prior written consent of Contractor.
The Agreement further notes, “After the signing of this Agreement and in conformance with Article 15, the Government shall not increase the economic burdens of Contractor under this Agreement by applying to this Agreement or the operations conducted thereunder any increase of or any new petroleum related fiscal obligation, including, but not limited to, any new taxes whatsoever, any new royalty, duties, fees, charges, value-added tax (VAT) or other imports.”
Ram pointed out that this state of affairs will not only be obtained for one year, five years or 10 years but until 2057
In light of the government’s refusal to make zero changes where the foregoing matters are concerned, Ram said, “The inevitable conclusion is that in standing up to Maduro, the Government has been commendably courageous, demonstrating fortitude and spine. But when it comes to Exxon, this Government is totally supine.”
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