Guyana bleeding from tax waivers to Exxon

Jul 15, 2024 Letters

Dear Editor,

Indented in the Guyana’s 2016 Production Sharing Agreement (PSA) with Exxon, is a clear and unequivocal statement (I will break it down in layman language) -renegotiation of the Oil Contract is quite possible as long as there is mutual agreement (Exxon and the Guyana Government) on both sides. It did not specify any limitations to renegotiation because unanticipated fluctuations/ market conditions that can cut both ways.

For simplicity sake, I offer this as an example. Let’s assume that Exxon’s projection is that of every barrel of oil belonging to them (pursuant to the prevailing agreement) sells at an average of US$40 in the world market, in 2024, that Exxon will garner a profit of US$1 after all Exxon’s expenses are paid.

However, what happens if the price per barrel plummets to $US 30? Will Exxon not hasten to invoke the renegotiation clause? They’d be fools not to as they will bleed and their Investors/ Venture Capitalists will scream bloody murder! Then, I ask the rhetorical question- why the Government of Guyana is reluctant to invoke the renegotiation clause and continue to aid and abet Exxon to bleed Guyana and Guyanese of their oil patrimony?

Editor, another burdensome clause in the existing contract is breaking the back of our Guyanese people – The Tax Write-off. Embedded in the current PSA is the clause that the Government of Guyana must pay – to Guyana’s GRA – all the taxes that Exxon owes to Guyana AND on top of that, issue Exxon with a tax receipt so they do not have to pay tax on that specific sum to the United States IRS (Internal Revenue Service). As extracted from Exxon’s 2023 Annual Report, Guyana Government paid GRA US$658 million- on behalf of Exxon. Folks, that’s 658 million pure US Dollars drained from Guyana’s Treasury in 2023 alone. Can you imagine what that sum, injected in Guyana’s economy, can do for every man, woman and child of this nation?

As a caveat, the current 2020 government inherited this cockeyed PSA which was brokered by the 2015 Government of Guyana. However, that does not exonerate this prevailing government from making overtures to Exxon for possible renegotiation. After all, that was vociferously thundered as part of their 2020 manifesto. Voters latched onto that largest of manifesto promises and reposed confidence that this government WILL renegotiate the PSA. What now? “Loss of investors’ confidence” is the oft repeated mantra. However, as a push back, I am citing 2 examples. In 2016, Trinidad commenced renegotiation of its PSA agreement, and pushed, and pushed and pushed. Today, Trinidad is enjoying the favourable outcome of its persistence. Senegal is currently (April 2024) setting the stage for PSA renegotiation with British Petroleum (BP). What of Guyana?

It is noteworthy to mention that Exxon has divested most of their global Oil & Gas Portfolio and acutely concentrating on rapidly developing/extracting its now prized jewel, Guyana’s Oil. As a hedge, should not this give added impetus for our Government to accelerate renegotiation talks? Guyana continues to bleed whilst other governments vacillate.

Editor, unless there are sensitive, mitigating and/or exigent circumstances that preclude such, the mantra of “loss of investors’ confidence” has lost its luster as many bellies go hungry every day. What happens if, in Guyana, there is “loss of VOTERS’ confidence” instead, sledgehammers at the ballot boxes?

Respectfully,
Jonathan Subrian, Esq.

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