Sam Hinds contradicts Govts position on Exxon PSA

Feb 07, 2024 News

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…tells US Business Channel Guyana got a fair deal

Kaieteur News – While the Government of Guyana has described the 2016 Production Sharing Agreement (PSA) with ExxonMobil and partners- Hess and CNOOC- as one of the world’s worst oil contracts, a different position was recently shared with the World’s leading business channel, CNBC.
Former Prime Minister and Guyana’s current Ambassador to the United States, Samuel Hinds in an interview with the News channel said Guyana has a fair oil deal.

CNBC released its story on January 26, 2024- capturing ‘How Guyana’s Oil Boom Sparked a Border Dispute with Venezuela’.
The former Head of State was among the few locals sharing their views on the subject; however, his was the only one that aligned with Exxon’s description of the deal.

According to the Ambassador, “On the question of whether the arrangement with Exxon is fair or not for Guyana, I was with it from the very beginning and maybe that’s where I think it is a fair arrangement. It is a production sharing arrangement.”
Another Guyanese, Terrance Blackman, Founder and Chief Executive Officer of the Guyana Business Journal said he believes the country should make the best out of the arrangement.

“Deals get struck and sometimes the deals don’t always favour you in all of the aspects and I think that Guyanese have to embrace that if they want to continue to participate in this broad global setup and to say how do we ensure that the terms (are better) going forward,” Blackman shared.
Meanwhile, Valerie Marcel, Director of New Producers Group- an intentional body that supports governments across the world on the design of their sectors for minimal emissions and better management- termed the contract as a “very one-sided deal”.

For his part, Director of the Institute for Energy Economics and Financial Analysis, Tom Sanzillo, views the deal as one-sided since it highly favours the American oil giant.

Sanzillo explained, “It’s a one-sided deal because Exxon pays no taxes, Exxon didn’t put up the insurance they are responsible for putting up, Exxon has a special arrangement with a maximized profit- first they get their profits first and then Guyana gets theirs later.”

He has been very vocal on the lopsided contract and has been subjected to criticism by Guyana’s Vice President, Bharrat Jagdeo.
Exxon in an invited comment told CNBC, “The government of Guyana negotiated a fair agreement in 2016 with globally competitive terms during a period with significant technical and price risks…”

Guyanese based here and abroad have been calling on government to renegotiate the contract for better terms. The deal was entered into by the former APNU/AFC Coalition administration.

That political group has been lobbying for the administration to utilize existing provisions within the contract to negotiate fairer terms for the country.
The PPP government however, though it promised in its 2020 Elections manifesto to “review and renegotiate” the oil contracts have not lifted a finger in that direction.

It now argues that deal must abide by the ‘sanctity of contracts’ principle.

Worst in the world

In the meantime, senior government officials continue to insist that the contract is one of the worst in the world.
It was reported that former President, Bharrat Jagdeo nearly cursed out one former Minister over the insinuation that the deal is a good one. In an interview with ‘The Guyanese Critic’ last January, he said Opposition Parliamentarian, Khemraj Ramjattan told him once in a conversation that the former Government left the PPP with the oil deal, from which revenues are now being derived.

He told Critic, “I wanted to use an expletive. I might have even done that…what they left us was a shitty agreement.”
Minister of Natural Resources, Vickram Bharrat previously said, “The PSA which was signed in June 2016 is probably one of the worst agreements in the history of this world or among all oil countries in this world. That was probably the worst oil deal ever.”

Similarly, the Attorney General and Legal Affairs Minister, Anil Nandlall SC in an interview aired on Globespan stated that the PSA Guyana signed with American oil giant, ExxonMobil is one of the most lopsided agreements signed in the country’s history. To this end, the AG noted that the lopsided contract must be a mistake that Guyana learns from when signing future oil and gas agreements.

Currently, Guyana receives a mere two percent royalty for its sweet light crude and settled for 50 percent profit sharing, after Exxon takes 75 percent of the earnings to clear its expenses. The company does not pay taxes here and benefits from the absence of a ring-fencing provision.

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• Exxon PSA, lopsided contract, oil, Sam Hinds, US Business Channel

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