7th oil project must not be approved without ring-fencing, other benefits- Dr. Adams

May 09, 2025 News

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…says Coalition’s plan to ring-fence oil projects was abandoned by PPP Gov’t

Kaieteur News- During the A Partnership for National Unity and Alliance For Change (APNU/AFC) tenure in office, the Coalition was actively pursuing a ring-fencing provision for the Stabroek Block.

A ring-fencing provision would mandate that only costs associated with that development is recovered from the specific project when it starts producing oil. This would avoid the operator, ExxonMobil from adding other expenses to the cost bank which are not related to that project and ensure a higher share of revenue is available to be split with the country.

The Production Sharing Agreement (PSA) stipulates that 75% of oil produced monthly can be recovered by the operator to cover expenses. The remaining 25% is then shared equally between the Government of Guyana (GoG) and the oil company as profits, with the country receiving an additional 2% royalty.

In light of a number of independent organizations such as the International Energy Agency (IEA) and World Bank forecasting lower oil prices in the years ahead as a result of the decline in demand for the commodity, the AFC was asked to share its view on government’s reluctance to implement a ring-fencing provision at a recent press conference.

Former Executive Director of the Environmental Protection Agency (EPA), Dr. Vincent Adams in response told this newspaper that irrespective of the fluctuating oil price, ring-fencing should be pursued by the GoG.

“Regardless of oil price, because oil prices will go up and down…ring-fencing should be a requirement on the table to start the discussion with Exxon,” he said.

Dr. Adams also revealed that the APNU/AFC government was pursuing the implementation of this provision while in office. These plans were however abandoned by the People’s Progressive Party (PPP) when the administration was elected in 2020.

The former EPA Head noted, “I know for sure the past administration; this was one of Mr. Granger’s highest priorities. I know Dr. (Mark) Bynoe (Former Head of the Department of Energy) was working on this with Exxon, but everything got abandoned as per normal by this current government when they got into office.”

In a brief telephone interview with Kaieteur News on Thursday, Dr. Bynoe confirmed that the previous government was in talks with ExxonMobil in this issue.

He explained, “I think it was in its early stages of discussion.” The former Head of the Energy Department added that the discussions were not only internal but the oil major was also engaged on the subject. He was reluctant to divulge more details regarding those discussions with ExxonMobil , explaining, “I would not go further than that. The (new) government is now in charge; let them go ahead and do what they have to do.”

Dr. Adams pointed to the duplicity of the incumbent administration as he recalled that while Vice President Bharrat Jagdeo was the Leader of the Opposition, he attacked the Coalition for “selling out” the nation’s patrimony by failing to ring-fence the Stabroek Block projects.

“They sold us out to the foreigners. The oil companies, every time there is a find out there, our people should be sad because nothing comes our way. We are gonna renegotiate those contracts because that’s not what we had in mind,” a passionate Leader of the Opposition argued before being elected.

Government however now supports the non-implementation of this provision since it believes Guyana will benefit from greater revenue in the future, despite the oil price forecast.

It should be noted that the 2016 PSA, signed by the former Coalition government does not include a ring-fencing provision; analysts therefore suggest that there will not be a breach to the agreement through the introduction of this requirement, since it would not affect expected revenue for the oil company.

With a new application actively being considered by the GoG for a seventh oil project, the former EPA Head insisted that the project should not be approved in the absence of this requirement.

He urged, “Ring-fencing must be a must and getting back as to whether we should approve the seventh project or not, absolutely I would say if you do not come to the table, and it’s not only ring-fencing, there are other issues in this contract that needs to be, negotiated. I would say if you do not come to the table to do this, we would not grant you your permit.”

Dr. Adams maintained that such a bold move was previously made under his stewardship of the EPA for full liability coverage, including an unlimited parent company guarantee. He recalled, “What we told them was thou will not produce one single barrel of oil unless we get that parent company guarantee (and) guess what, within days they came and they signed that parent company guarantee.”

Consequently, Dr. Adams urged, “We should be withholding the permit if we do not get the fair deal as far as the people are concerned.”

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• abandoned, Adams, Bynoe, Coalition, Plans, ring-fencing

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