Change of govt. or not, Hess sees no fiscal risk to Stabroek Block contract

Dec 16, 2024 News

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By Renay Sambach 

Kaieteur News- Whether the People’s Progressive Party/Civic (PPP/C) retains power after the anticipated 2025 General and Regional Elections or a new administration assumes office, Hess Corporation’s Chief Executive Officer (CEO), John Hess, is confident there will be no fiscal risks to the contract governing operations in the Stabroek Block.

During an interview with an international research institute, John Hess, expressed confidence that the next government will uphold the fiscal terms of the 2016 Production Sharing Agreement (PSA).

ExxonMobil Guyana Limited (EMGL) operates the Stabroek Block in partnership with Hess and CNOOC. The agreement exempts the oil companies from paying taxes directly, with Guyana covering these costs, and allows the companies to recover up to 75% of their investments before the remaining 25% is split. Of this, Guyana receives 12.5%, in addition to a 2% royalty paid by the oil companies.

Guyana’s political landscape features three major parties, each with its own stance regarding the renegotiation of the Stabroek Block oil deal. The PPP/C has firmly stated that it will uphold the sanctity of contracts and will not renegotiate the agreement. The People’s National Congress Reform (PNCR), while not committing to a renegotiation, has expressed a desire to engage with ExxonMobil to secure greater benefits for the Guyanese people. Meanwhile, the Alliance For Change (AFC) has also adopted a cautious approach regarding renegotiation.

While the current government has acknowledged that the deal benefits the oil companies more than it does the country – the Irfaan Ali-led administration has taken the stance to not make changes to the contract, touting sanctity of contract. Hess described the Stabroek Block partners’ relationship with the Irfaan Ali-led administration as “strong” and one that they are grateful for. “I think President Ali is doing an outstanding job leading his country building a policy for shared prosperity for every Guyanese citizen…” Hess added.

In relation to the current administration, Hess said, “Look the government has been very clear that you know they will honour the contract, they will honour the fiscal terms, they will hold us accountable to that and their biggest encouragement is you know let’s develop these oil resources and gas ultimately as safely, quickly and economically as we can and Exxon as operator and we as a joint venture are continuing to do that.”

Notably, during the interview, it was highlighted that the new PSA for future oil deals includes higher royalties and an income tax provision, marking an improvement to the terms governing the Stabroek Block. When asked whether there have been any changes to the Stabroek Block agreement since its royalty was increased from 1% to 2%, Hess confidently stated, “No, and the government has assured us that they will not change the terms they want us to develop the oil.” Hess explained that the sooner the Stabroek Block partners recoup their investments, which to date is over US$55 billion, the sooner the Guyanese government will see a larger share.

No fiscal risks

Moreover, when asked in the scenario of a change of government, if he sees any fiscal risk, Hess affirmed, “No, no.”

In September, Leader of the People’s National Congress Reform (PNC/R), Aubrey Norton unveiled his party’s 20-point plan for the oil and gas sector, promising to review the lopsided 2016 deal that was signed by the Coalition Government of which he was part of with US oil major ExxonMobil.

Norton, who has shied away from saying if elected he will “renegotiate” the contract had outlined the coalition’s key strategies for managing the oil and gas sector, with a heavy emphasis on ensuring Guyanese benefits more from its abundant oil resources. Following the announcement, the plan was criticised for lacking commitment to actually make changes to the deal. Further, Nigel Hughes, prominent attorney and elected leader of the AFC has taken a cautious stance regarding the contentious issue of renegotiating the oil deal. Days before his election as leader Hughes declined to comment on the potential renegotiation of the contentious 2016 oil deal saying that the company is a client of his law firm.

Hughes has 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.”

(Change of govt. or not, Hess sees no fiscal risk to Stabroek Block contract)

*(Change of govt.), (Change of govt.)

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• Aubrey Norton, Hess, Irfaan Ali, Nigel Hughes, renegotiation, Stabroek Block

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