Forde urges immediate changes to oil contract

May 23, 2024 News

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– cites inadequate insurance, ramped up production

Kaieteur News – Senior Counsel Roysdale Forde believes that with the numerous concerns uncovered and being raised over 2016 Production Sharing Agreement (PSA) between ExxonMobil Guyana Limited (EMGL) and the Government of Guyana, including more recently, the lack of adequate insurance, the oil deals must be immediately revamped.

Forde S.C., an aspiring leader of the People’s National Congress Reform (PNC/R), during an exclusive interview with this publication, did not mince words in light of the recent revelations saying, “the PSA, in its current form, is riddled with issues that could have devastating consequences for Guyana.”  The recent information that has come to light about the insufficient insurance coverage is particularly alarming. It is imperative that we address these flaws head-on.”

Forde, elaborating on the inadequacies of the insurance provisions, which he described as grossly insufficient for the scale of ExxonMobil’s operations in the Stabroek Block said, “the insurance coverage outlined in the agreement does not adequately protect us from the financial fallout of potential environmental disasters.” He suggested that, “in the event of a significant spill or accident, the financial and environmental burden could fall heavily on the Guyanese people.”

The Member of Parliament and Shadow Attorney General explained that at the time of the signing of the Agreement back in 2016, such insurance might have been considered appropriate but with the recent ramping up of production by each of the producing vessels beyond their respective nameplate capacity in the Stabroek Block, the matter of insurance is of greater importance. Highlighting the broader implications, Forde stressed the importance of holding multinational corporations to the highest standards of accountability.  “This isn’t just about one agreement; it’s about setting a precedent for how we handle our natural resources and engage with foreign investors,” he asserted. “We must ensure that our agreements are robust, transparent, and in line with international best practices.”

During the interview, Forde, in reviewing of the PSA’s flaws, compared it to similar agreements in other oil-producing nations say “Other countries have secured far more comprehensive protections. Guyana should demand no less,” he argued. “Our agreement lacks several key safeguards, which is unacceptable for a nation with such significant natural resources.”

The Senior Counsel’s call for a review, he affirmed, is not merely a procedural step but a critical move towards ensuring the nation’s long-term stability and prosperity. “A review will allow us to scrutinize the PSA thoroughly and make necessary amendments to protect our interests,” Forde explained. “This is about ensuring that our natural resources benefit all Guyanese, now and in the future.” Forde also touched upon the potential economic implications of the PSA’s concerns saying he warned that inadequate insurance and other loopholes could deter future investments.

“Investors need to see that we are serious about protecting our assets and maintaining high standards. If we don’t address these issues, we risk undermining investor confidence,” he said. When asked about the response from the government and other stakeholders, Forde remained optimistic but resolute. “I believe there is a growing recognition of the need to revisit this agreement. Citizens, civil society groups, environmental advocates, and many in the business community are rallying behind this cause,” he noted. “The government must act swiftly and decisively.”

Earlier this week, this newspaper reported Chartered Accountant, Christopher Ram saying that in the absence of an unlimited parent company guarantee, Guyana is at the mercy of the oil companies, Exxon, Hess and CNOOC, should a major disaster occur. Ram also warned that the insurance company can refuse to compensate the country for any damages as it knowingly allowed the operator to breach safe operating limits.

Ram explained, “In petroleum production, there is a safety margin below the rated productive capacity of a well. Not only is there an increased risk that something can go wrong, but that when it does, the insurance companies will refuse to pay because you have breached the safety limit.”  Furthermore, Ram cautioned that the oil companies too can refuse to accept responsibility since the Government was not only aware of the breached safe operating limits but condoned and supported it.

During his weekly press conference last Thursday, Vice President and Chief Policymaker for the petroleum sector, Bharrat Jageo was asked about the capacity of the Environmental Protection Agency (EPA) to review and approve debottlenecking activities by Exxon, to support the ramping up of production.  The VP explained that it was “safe” as technical officers attached to the regulatory body as well as the Ministry of Natural Resources examine the plans of the operator.

He said that “Last week I dealt with that issue and I said that my briefing is that before they ramped up production beyond rated capacity, that this was cleared with the Ministry.  The Ministry assured me their technical officers examined it, I spoke with the EPA, they said they had examined it carefully too so they are aware and it was done with their approval. Both agencies the Ministry of Natural Resources and the EPA and they believe it was done and it’s safe.”

To this end, Ram told Kaieteur News that he does not believe the former President understands the implications and consequences of breaching the safety limit of FPSOs.  Ram argued, “already there are many circumstances and eventualities from which the 2016 Agreement exempts the oil companies from responsibility and liability. These include “indirect, punitive or consequential damages, including but not limited to, production or loss of profits”. Jagdeo’s comments are clearly irresponsible, show recklessness rather than better contract administration and have huge financial implications for the country.”

The Attorney-at-Law was pointed out that Guyana already has a number of wells producing crude oil simultaneously, which he described as “more than enough”. He therefore reasoned, “…if only the President would rein in Jagdeo from his senseless behavior; one oil spill could see the entire Natural Resource Fund exhausted just like that.”  Presently, Liza One and Liza Two are producing about 150,000 bpd and 250,000 barrels per day (bpd) respectively. The EIAs each specifically outline 120,000 and 220,000 bpd, as the safe operating limit for Liza One and Two, respectively. Similarly, the third oil project- Payara- is also producing approximately 230,000 bpd even though the vessel’s nameplate capacity is 220,000 bpd.  Although all three of the FPSOs are currently producing above the respective design capacity, the Liza Unity is poised for further optimization works.

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• ExxonMobil, Government, oil contract, Senior Counsel, Senior Counsel Roysdale Forde M.P

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