APNU+AFC renegotiated Janet Jagan’s oil contract

Mar 22, 2024 Features / Columnists, Peeping Tom

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Kaieteur News – Vice President Jagdeo when questioned in the past about Guyana’s National Depletion Policy gave the explanation that the objective was to extract as much oil as possible in the shortest available time. The rationale for this was the assumption that there was only a narrow window for exploiting the country’s petroleum reserves since the world was moving towards renewables – what is known as the energy transition.

Yesterday, he said that world’s energy transition towards renewables was not on track and as such the phasing out of fossil fuels is not likely to take place soon. What this means is that his assumptions about a narrow-window were wrong. This is what he was being told all along by persons such as Glenn Lall. The publisher of Kaieteur News had said that there was no need to exhaust our oil reserves rapidly, especially under an unfair contract which limited the returns to Guyana to a 2% royalty and 12.5% profit sharing.

Vice President Jagdeo’s misjudging of the trajectory of the global energy transition however can be used to Guyana’s advantage. It provides him and the country with the opportunity to realign Guyana’s National Depletion Policy with the realities of the present global energy transition and the principles of a just transition which he touts but does not clearly define.

Jagdeo’s initial stance, advocating for expedited oil extraction under the assumption of a narrow window for fossil fuel exploitation, reflected a common but naïve narrative. The urgency to maximize oil production stemmed from the belief that renewable energy sources would rapidly supplant fossil fuels, rendering untapped reserves obsolete. However, as events unfolded, it became evident that this projection was overly optimistic and failed to account for the complexities of global energy transition.

The Vice President made a misjudgment. Contrary to earlier assumptions, the transition towards renewables has not progressed as swiftly as anticipated. While renewable energy technologies have advanced significantly, fossil fuel dependency, coupled with geopolitical factors, have prolonged the dominance of oil and gas in the global energy mix.

Critics, including Glenn Lall, have long cautioned against the hasty depletion of Guyana’s oil reserves, particularly under contracts with unfavourable terms that disproportionately benefit foreign corporations. Lall’s advocacy has been for better terms and sustainability so that Guyanese can get a fair deal and provision is made for future generations to benefit from Guyana’s oil wealth.

The call for a just energy transition globally must also be mirrored locally. A just transition requires not only environmental sustainability but also social and economic justice for all stakeholders, including future generations.  By rushing to exploit as much oil in the shortest possible time, the PPPC government was effectively depriving future generations of the wealth to which they were entitled, considering Guyana’s share in every barrel of oil. There is no shame in being wrong, just in being wrong so often. Vice President Jagdeo now has an opportunity to pivot towards a more balanced and equitable National Depletion Policy. Such a policy should prioritize the long-term interests of Guyana and its citizens, rather than short-term gains for multinational corporations.

The development of a realistic National Depletion Policy must also be done in tandem with revisiting contractual agreements to ensure a fair distribution of revenues between the oil companies and Guyana. Negotiating for higher royalties and revenue-sharing mechanisms, along with ring fencing and caps on interest rates can maximize the economic benefits derived from oil extraction.

In addition, while acknowledging the continued relevance of fossil fuels in the near term, Guyana should proactively invest in renewable energy infrastructure to lay the groundwork for a sustainable future. This includes incentivizing private investment in solar, wind, hydroelectric, and other renewable energy sources, rather than relying on fossil fuels and natural gas for Guyana’s long-tern energy needs.

Now however that Jagdeo has admitted that the phasing out of fossil fuels globally is off- track, he may now wish to put Guyana’s national Depletion Policy and contract renegotiation on the front burner. It is ironic that he says that oil was discovered in 2015 under the PPP and that the APNU+AFC signed the contract for production. However, the signing of the Production Sharing Agreement amounted to a renegotiation since the PPPC royalties was for 1%.

If the APNU+AFC was able to renegotiate the PPPC’s 1%, without any objection about the sanctity of contracts, why cannot Jagdeo renegotiate the Production Sharing Agreement which he had promised to do. The fact that Guyana has a PSA is indicative that the terms of engagement with the oil companies can and were renegotiated.

But do not dare mention this to Jagdeo, before he hastily calls another press conference. And finds another excuse why the contract cannot be renegotiated.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions and beliefs of this newspaper and its affiliates.)

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• APNU+AFC, Contract, Guyana's National Depletion Policy, oil, Peeping Tom

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