uMuntu ngumuntu ngabantu; Motho ke motho ka batho – I am because you are; you are because we are.
King IV Report on Corporate Governance
The British economist, Sir Paul Collier, is reported to have stated that the “tearing up Exxon deal will be disastrous”; the contract is a reasonable one; and the focus should instead be on scrutinising costs (SN 22 March 2018). We are not aware of any suggestion that the agreement should be scrapped. Rather, we have advocated for a renegotiation of the 2016 Production Sharing Agreement (PSA) based on several areas of concern. These include: the low royalty rate of two percent; the 50/50 profit sharing arrangement (after deducting 75% of revenue to offset recoverable costs), as opposed to a revenue-sharing one, and the associated difficulty in verifying such costs; the over-generous fiscal concessions granted; and exemptions from various forms of taxation. We note that a legal challenge is being mounted on whether the Minister responsible for petroleum has the powers to sign off on an agreement that is so generously weighted in favour of the U.S. oil giant; and whether Exxon’s three subsidiaries met all the legal requirements for the grant of a petroleum licence. However, this does not equate to a call for the scrapping of the contract with Exxon.
While we agree with Sir Paul about the need to scrutinise costs, we have already been saddled with an invoice in the sum of US$460 million representing pre-contract costs and for which we have no idea as to whether this figure was independently verified before it was inserted in the PSA. We believe that the Administration should make a sincere and dedicated effort to engage Exxon with a view to amending the Agreement to ensure that Guyana gets a better deal for the exploitation of what turns out to be its most valuable natural resource.