Govt. silently addressing contentious issues in Exxon’s contract – Jagdeo

Jun 17, 2024 News

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Kaieteur News – Despite no move to ring-fence Exxon’s oil projects or even installing its own meters at the pumps, Vice President Bharrat Jagdeo last week boasted that the Government of Guyana has been silently addressing contentious issues of the Production Sharing Agreement (PSA) with the US oil giant in order to fulfill its promise of better contract management.

Among the some of the egregious flaws in the contract, which the government has refused to renegotiate is that Guyana has to pay the legal fees and any court judgment against Exxon once these are incurred during the production process. However, while in opposition, Jagdeo had promised Guyanese that a PPP/C administration would pursue better contract management to address some of the weaknesses in the contract signed by the APNUAFC Coalition Government back in 2016.

Jagdeo was asked by Kaieteur News whether in the interest of better contract management he would address the clause whereby Guyana would have to foot the legal bill of both sides whenever the government and the oil company end up in international arbitration. He said: “without creating a wave, we don’t shout loud we are addressing a lot of these things.

We don’t shout at the top of our voices, we are addressing them with the involvement of the company too.” Jagdeo explained that there are a lot of things that the government has been addressing in the PSA. One being “a contentious issue through the change in the law and also the permit, the license that we issued which is the decommissioning fund establishment.”

Additionally, on the environmental side of things he said they are ensuring that a law is in place to ensure the reinforcement of the Environmental Protection Agency (EPA) Act, which states full liability for permit holders. The new act will also include other groups like the shipping companies. “We are putting in the act a mechanism that will allow people if they suffer losses, that they can go to a tribunal to address these issues. In the act too we are addressing the environmental issues through that. We have already addressed resolution through a new PSA the low royalty rate, the no taxes through the ne PSA,” he stated.

Meanwhile, on the arbitration aspect he explained that “international arbitration is standard in almost any contract so there are some standards that you can’t change. You can’t say okay we are going to hire two local persons to do this. It will never change. You can’t fight things that have been part of contract law and contract of this nature for centuries and you can’t change that because there is another party, his and the other party believe that an international body should be part of it.”

When asked to clarify if the government would be looking to have discussion with Exxon or looking to find a way out of footing both sides legal bills in international arbitration, Jagdeo said “that is what we signed up to. We signed up to this nonsense…So ultimately I think eventually that will happen.”
Should ExxonMobil be taken before the courts in Guyana or even before a regional or international court for any reason that has direct relations to the company’s operations in Guyana, the cost incurred for all legal fees or judgment handed down will be paid by Guyana. Under Annex C of the contract, there is a vast area that deals with cost recovery.

This is the range of items the cost for which will be recovered by ExxonMobil before Guyana can see profits. Annex C has a subheading “Legal expenses.” This states that all legal expenses incurred by ExxonMobil for any matter in direct relation to operations in Guyana shall be included in cost recovery.

The PSA specifies, “All costs and expenses of litigation and legal or related series necessary or expedient for the procuring, perfecting, retention and protection of the contract area and in defending or prosecuting lawsuits involving the contract area or any third party claim arising out of the activities under the agreement or sums paid in respect to legal services necessary or expedient for the protection of the interest of the parties are recoverable.

Where legal services are rendered in such matters by salaried or regularly retained lawyers of the contractor or an affiliated company of the parties comprising contractor, such compensation will be included instead under sub-section 3, 1 (B) or 3.1(D) above as application.” Subsection 3, 1(B) speaks to labour and associated labour costs and 3, 1 (D) speaks to third party contracts. If there is an oil spill and ExxonMobil is sued, Guyana will pay the price. This annex in the contract harmonizes with what environmentalists have been saying about the provisions of the Environmental Impact Assessment (EIA).

Campaign promise

It was recently reported that the VP said he is confident that the People’s Progressive Party Civic (PPP/C) has kept its campaign promise to engage in better contract management, since the administration has managed to enact Local Content legislation and will be receiving free gas from the offshore, Stabroek Block operations to provide cheaper electricity to Guyanese.

The PPP/C in its 2020 Elections Manifesto promised to not only to renegotiate oil contracts but to engage “immediately” in better contract administration so that the country benefits more from its oil and gas resources. It has now decided it no longer wants to renegotiate the 2016 oil contract with ExxonMobil and its Co-Venturers, Hess and CNOOC, due to its potential to slow down the industry.

In its evaluation of the government’s performance, the Opposition described the PPP’s management of the Exxon contract abysmal, owing to the glaring lack of transparency and failure to secure more benefits through the recently approved Whiptail development, Exxon’s sixth deep-water project.

The lopsided PSA cleverly outlines in the Stabilization Clause that no new taxes, laws or royalty should be imposed on the Contractor that causes adverse effects on its profits as government would be required to take all actions necessary to ensure the contractor’s benefits are restored.

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• Exxon, Government, industry, Jagdeo, Oil Company

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