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Assets already paid for with US$34B of Guyana’s oil are not owned by the country- Jagdeo
Kaieteur News- Although ExxonMobil Guyana Limited (EMGL) has recovered over US$34B of Guyana’s oil to pay for the assets that currently produce oil and even fund projects that are still to come on stream, Vice President Bharrat Jagdeo has said that these assets do not belong to the state.
The VP made this clear during his press conference on Thursday at Freedom House, in response to a question from Kaieteur News. The leader was asked who the owners are of the assets that have been paid for using US$34B of this country’s oil.
To this end, he explained, “So first of all, the assets still belong to the company. They don’t change ownership from the company. But, so these assets are still working, so what happens is that if you pay off with the assets, then you have more money left now to distribute as profits.”
Vice President, Bharrat Jagdeo
Jagdeo said that the country does not become the owner of the assets after the costs have been recovered, but still stands to benefit from an increased share of profits as a result.
“So now we will have more money to distribute as profit, because we paid off of the assets. They are off our books. So, what happens is the government’s share of revenue skyrockets, which will happen in future years. So, the assets ownership don’t change, it’s just the composition of the distribution, or the share, the proportion of the revenue set aside for distribution, to government and the investor, as profit, their share goes up,” the chief policymaker for the sector informed.
He pointed out that Guyana currently pays 75% towards cost recovery while the remaining 25% is shared with the operator as profits, with the country gaining an additional 2% in royalty.
As the value of the cost bank declines, he reasoned that the country will experience a higher flow of revenue, although the ratio will remain the same for calculating profits.
“So, we’ll get 50% of the profit, now in the future our 50% would be of a bigger pool. The same ratio will maintain, 50%, but of a bigger pool of resources, and then plus 2%,” the VP noted.
Jagdeo previously told reporters that Exxon is free to sell the assets paid for by Guyana to handle costs related to an oil spill, as the country is not a co-owner of the infrastructure.
Table showing the Stabroek Block projects that could have been paid off by Guyana with ring-fencing
Subsequently, former head of the Environmental Protection Agency (EPA), Dr. Vincent Adams, in a scathing response, argued that the VP’s explanation was illogical.
Dr. Adams said, “He need to go read the (oil) contract. They have got to turn over all of those assets to us, free of charge, and now he talking ‘well, we would freeze the assets and sell it.’ It’s the stupidest thing I have ever heard.”
Furthermore, he believes, “Exxon sees that this government is reckless and spineless and weak and they are taking advantage of them”.
Assets and the 2016 PSA
Article 20 of the Production Sharing Agreement (PSA) specify terms related to ‘Rights to Assets’ state that upon expiry or termination of the Agreement, the Contractor shall deliver to the Minister, free of charge, in good order and condition, (fair wear and tear except) all installations, works, pipelines, pumps, casings, tubings, engines and other equipment, machinery or assets of a fixed or permanent nature constructed, used or employed by the Contractor or the Operator in the Contract Area.
It goes on to state that this also applies to any fixed assets relating to Petroleum Operations outside the Contract Area and movable assets owned by the Contractor or Operator and used or employed in connection with Petroleum Operations and located in Guyana for which costs have been fully recovered.
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This government is very weak and spineless. Dr .Adams I agree with you to go and review the contract and reverse that contract if you have to do it