‘I cannot comment on renegotiation of Exxon deal; company is a client of my law firm’ – Nigel Hughes 

Jun 30, 2024 News

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Kaieteur News – Days before his election as leader of the Alliance For Change (AFC), Nigel Hughes declined to comment on the potential renegotiation of the contentious 2016 oil deal signed between Guyana and ExxonMobil Guyana Limited (EMGL), saying that the company is a client of his law firm.

Hughes, a prominent attorney and former AFC Chairman who was successful elected leader of that party on Saturday, made these remarks during an appearance on Dr. David Hinds’ programme ‘Politics 101’ on June 27.

The renegotiation of the Production Sharing Agreement (PSA) signed in 2016 is the subject of ongoing debates. Calls from locals and industry experts have urged Guyana’s leaders to reopen negotiations with ExxonMobil and its partners, Hess Corporation and China National Offshore Oil Corporation (CNOOC), to ensure more equitable benefits from the lucrative Stabroek Block.

However, those calls have fallen on deaf ears as the leaders have all steered clear of calling for a renegotiation of the lopsided deal. As for government, they defended their stance by citing the principle of sanctity of contract, asserting that they will uphold the terms of the existing agreement.

During the interview, Dr. Hinds asked, “Nigel as leader of the AFC, are you going to urge the party to renegotiate the contract, if it gets into power by itself or with other parties? The oil contract I’m talking about with Exxon…”

“David I, I will say this and I think I said it the other night…Exxon is a client of our firm, I’m making it public now so nobody can’t say that I have never made it [known]. Several oil companies are clients of our firm. I cannot comment on that,” Hughes responded.

Former Minister of Natural Resources, Raphael Trotman, and now General Secretary of the AFC, during his tenure under the APNU + AFC Coalition government between 2015 and 2020, was the one who signed the deal in 2016 with Exxon.

The deal Trotman signed waives all taxes from the oil companies, gives Guyana a 2% royalty on its rich resources, and agrees to the oil companies recovering 75% of investments before the remaining 25% is shared, with Guyana receiving 12.5%. The arrangement, with the lack of ring-fencing, sees Guyana paying for projects that are yet to commence production activities. Each month bills from future producing developments are added to the list of expenses to be cost-recovered by Exxon.

A few months ago, Trotman in his book titled, ‘From Destiny to Prosperity’ offered support to the government to renegotiate the lopsided Stabroek Block deal the country has with an ExxonMobil-led consortium. However, Trotman’s offer was refused by Vice President Bharrat Jagdeo.

Notably, Hughes stated that while he is unable to comment on renegotiating the lopsided deal, he has other plans if elected.

He stated, “What I have said is that I will set up committees and if we get into government, commissions that are specifically dedicated to dealing with oil, generally.”

“I will insist that they hire the best professional advice internationally, both in terms of law in terms of economics, and in terms of the business of oil because the business of oil is the most sophisticated business on the planet because it runs the planet,” Hughes continued

Furthermore, Hughes elaborated that implementing changes in the country’s direction requires careful consideration and planning. He stressed the need to fully understand international dynamics.

“For me, one of the fundamental things for this country going forward is you have to have a state planning secretariat, or a commission which is going to map the future of this country at least into 15, 20 years cycles and we have to get the best research persons and the best educated persons into those commissions and that state planning so that they can assess exactly how it is that we are going to go forward,” he added.

The first significant oil discovery offshore Guyana was made by ExxonMobil in 2015 at what is now the Liza project in the Stabroek Block with oil production now at some 645,000 barrels per day (bpd) up from 98,000 bpd from its first full year of production.

Since 2015, ExxonMobil and its partners have made more than 30 additional offshore oil and natural gas discoveries within the Stabroek Block.

Guyana’s oil production comes from three floating production, storage, and offloading (FPSO) vessels: Liza Destiny, Liza Unity, and Prosperity.  These vessels produce oil and natural gas from the Liza and Payara projects. All associated natural gas is re-injected into wells to support its production and used as on-site fuel.

Currently, the Block’s partners plan for the combined production capacity to reach approximately 1.3 million b/d by the end of 2027, with plans to develop three additional projects: Yellowtail, Uaru, and Whiptail.

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• company, Exxon, firm, Nigel Hughes, renegotiation

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