Latest update January 7th, 2025 2:29 AM
Norton now wants data on Exxon’s well to decide if ring-fencing project is correct path for Guyana
Kaieteur News – In a recent press conference, Guyana’s political opposition asserted that they require detailed well specifics and expert advice before conclusively determining whether ring-fencing projects within ExxonMobil’s Stabroek Block is the correct path.
Leader of the Opposition, Aubrey Norton
On Thursday, Leader of the Opposition (LOO) Aubrey Norton was asked about the ring-fencing of Exxon’s multi-billion-dollar projects in the Stabroek Block. Norton argued that, as a relatively new player in the oil and gas industry, Guyana lacks technical capabilities, urging a cautious approach. He emphasised the need to engage experts and thoroughly assess available options before committing to ring-fencing.
“It is easy to say do one, do two without looking at the consequences without the experts’ knowledge,” the Opposition Leader said. Ring-fencing, in the realm of oil and gas, is a financial safeguard to segregate the economic activities of distinct projects. This strategy prevents the mix of funds from different ventures, ensuring that profits generated by a particular project are solely utilized to cover its associated costs.
It should be noted that the 2016 Production Sharing Agreement (PSA) signed by the previous Coalition government, stipulates that a whopping 75 percent of the monthly revenues are to be deducted as costs to repay the companies’ shareholders, while the remaining proceeds are split as profits equally with Guyana. In the absence of a ring-fencing provision, the companies have the leeway to use the profits from producing oil projects to pay for others that are yet to commence production. A ring-fencing provision would therefore prevent oil companies from using revenue generated from a production field to offset costs in another project. It would also mean that when that project cost is repaid, Guyana would enjoy 50 percent of the revenue generated there.
The Opposition’s economic advisor, Elson Low echoed similar sentiments as Norton. Low stated that access to detailed offshore operations data, particularly regarding the complexity and nature of the wells, is crucial for informed decision-making. The advisor underscored that the information available on well size and other aspects is insufficient, emphasizing the necessity of a holistic understanding of the wells’ complexity and deposits.
Opposition Economic Advisor, Elson Low
“One of the reasons that we say when we’re in office we will review this data and seek expert’s advice is because we want to ensure that it is clear what the correct path forward. The leader just mentioned that we don’t want to sway investors. Especially if we’re looking at circumstances where ring fencing is not appropriate but in order for us to really be able to put forward a final decision and to approach this issue, we will need access to that data and to that end we have been calling for access to data,” the Opposition economic advisor said.
The Opposition advisor said, “What we’re saying is ring-fencing is something we’re looking at but it’s not a hard and fast approach rather it is dependent upon getting access to more information.”
Low stressed the importance of considering the financial implications of well complexity on investor decisions and expressed a need for additional information to gauge potential negative impacts on investment decisions.
“So we need to get additional information so that we can get a sense of how investors will look at different well prospects and therefore, whether ring-fencing will impact the investment decisions negatively or not cause an impact therefore we need access to that information but also the appropriate expertise to be able to guide us as we make that evaluation,” he responded.
Notably, during one of his 2023 press conferences, Vice President Bharrat Jagdeo accepted that ring-fencing the oil projects will allow Guyana to benefit more from the wealth generated in the resource-rich Stabroek Block, immediately. Despite his acceptance however, the VP is unwilling to affect any changes to the lopsided deal that United States oil giant, ExxonMobil and its partners.
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