Guyanese deserve to know secret interest rates being paid to ExxonMobil – Leader of the Opposition

Mar 31, 2024 ExxonMobil, News, Oil & Gas

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Kaieteur News – For over four years now, Guyana’s oil has been used to a pay a secret charge to ExxonMobil for its investments across the Stabroek Block.

The American oil giant funds the development of new projects as well as exploration activities. The country then repays the company for its investment, or equity contribution, through the cost recovery mechanism outlined in the 2016 Production Sharing Agreement (PSA). Each month, the company is permitted to deduct 75% of the revenue earned towards its investments.

Though some stakeholders argue that it is Guyana’s oil money being used to finance the projects and even explore the basin further (in the absence of a ring-fencing provision), the country pays an uncapped and unknown interest rate to ExxonMobil. Leader of the Opposition, Aubrey Norton during his weekly press conference on Thursday said Guyanese deserve to know the secret rates being paid to the Contractor.

Norton was at the time responding to a question from this publication on whether he is concerned that the country is now in its fifth year of oil production but does not know the interest rates. Kaieteur News also asked the Leader of the Opposition if he engaged Exxon for the release of the information.

In his response, he explained, “As it relates to transparency and accountability, we believe that there should be. You would recall in our time in government, Exxon was allowed to brief the Opposition etcetera and we had clear indication that we are for transparency and accountability and I believe that Guyanese deserve to know. We could differ on at what stage they know but once there is an agreement, Guyanese should know.”

The Opposition Leader said that there has not been an engagement with Exxon for the year; however, the political body will inform the company of its position on the matter at its next meeting.

When he was asked if the Opposition will press the company for the release of the interest rates, Norton said, “When we (the Oil and Gas Committee) meet and determine what will be our strategic focus when we meet Exxon, that group will determine in large measure what is it we put on the agenda.”

Vice President, Bharrat Jagdeo who is tasked with management of the petroleum sector previously told Kaieteur News that it was a standard practice for a return to be generated on a company’s equity.

“Regardless of whether you make the financing in the form of a loan or equity you have to get a rate return. There is a cost of capital and that is how it is,” Jagdeo explained.

Consequently, this publication queried whether there was a standard rate Guyana is paying. The subject of a standard rate is particularly significant, given that Guyana has already been warned by the International Monetary Fund (IMF) that the country could lose massive revenue by failing to cap the interest rates on the investments for its oil projects.

The IMF said it is an industry norm that the government of the day disallows interests from being recovered on loans. Even if this is allowed, the administration sets a cap or limit to prevent the full interest amount from being recovered. The IMF pointed out that Guyana not only allows the recovery of the interest but also sets no cap.

In his response to the specific question however, the former President told this newspaper, “We are not paying anything. The Government of Guyana is not paying anything because they have to raise the financing using the best efforts; the cheapest cost of financing that is what they are supposed to do as a company, so this is what can be analyzed even when you look at the cost bank.”

Before further questions could be asked, Jagdeo requested that the press conference “move on”. The VP has constantly dodged the issue of the interest being charged on the company’s equity contribution. In the meantime, Publisher of Kaieteur News, Mr. Glenn Lall estimates that Guyana could be losing about US$4B annually, at a 10% interest rate.

According to the PSA, the Contractor, ExxonMobil Guyana does not need the approval of the Minister to recover interest on loans it took to produce the oil and gas resources.

To this end, Lall has pointed out that the country could be paying out more on interest rates alone, than it made in profits from the sector.

“Guyana’s 2023 budget and more, is wah Exxon taking out from our oil in interest alone and all jack man silent in this country. The whole year Guyana barely scraping in one and one something billion from our oil, and we giving away US$4B in interest alone,” he said.

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