The Production Sharing Agreement (PSA) between Guyana and ExxonMobil’s local subsidiary and its partners was informed by the national circumstances at the time and critics need to acknowledge the context, according to Minister of Finance Winston Jordan.
“If you ask me what do I think about the 2% royalty or the whole deal, I will say that everything is in context,” Jordan told Stabroek News in an interview last week.
He said that while there are many criticisms of the contract, he does not see anyone putting into perspective the situation at the time and the circumstances that led to the deal being brokered.
“Hindsight is 20/20. Maybe if we all had the same data and everything else, we would have never ended up with 2% and we would have fought what it is. But everybody on our side, be it the previous government or our side, was shooting in the dark,” he said.
“What happened is that the field was growing grass, we didn’t have the money to weed it, somebody came along and we said, ‘You were entitled to 60 blocks but here ‘ tek the whole darn field, as long as you keep it, weed it and you give me a lil something.’ And I think it is that kind of mentality that informed where we are today,” he added.
The Finance Minister pointed to reports of Royal Dutch Shell’s sellout of its share in the Stabroek Block for US$1, saying that you had a company “seeing no hope” then “and selling for $1 and that is how you end up with Hess and CNOOC.”
The 2016 PSA has been criticised since it was released at the end of 2017. It contained a 2% royalty figure for Guyana on every barrel of oil which experts said should have been far higher since the deal was concluded after ExxonMobil’s major oil find in its 6.6 million acres Stabroek Block.
It also catered for a US$18 million signing bonus, which experts said should have been higher and which the government had not publicly confirmed until the information was published by two private local newspapers. ExxonMobil’s local subsidiary, Esso Exploration and Petroleum Guyana Limited (EEPGL), also retains control over hundreds of oil exploration blocks within its Stabroek Block when the maximum figure, according to the law, should have been 60. A series of other issues have been pointed out with the PSA, including the fact that Guyana did not have a single oil expert on its negotiating team.
Only in June of this year, government, for the first time, expressed concern that the lack of ring-fencing provisions in the PSA could negatively affect revenue earned from oil.
When the 2016 renegotiated agreement was signed, Raphael Trotman, the Minister of Natural Resources, was responsible for oversight of the sector but he has absolved himself of any responsibility in relation to the absence of ring-fencing provisions. He has said that he acted on the advice and direction of the Guyana Geology and Mines Commission (GGMC).
Commissioner of the GGMC Newell Dennison indicated in a report he made in April 2016, following a meeting with ExxonMobil’s officials at their Houston, Texas office, that he was sent to a “technical caucus” when the renegotiation came up. The report by Dennison also provided some insight into what would be seen as hard-nosed tactics by ExxonMobil, where only he and the Manager of the then Petroleum Division, Christopher Lynch, attended as Guyana’s representatives.
Dennison said EEPGL “confronted” the GGMC on the matter of their contract and licence. Among other things, the issue of a signing bonus also came up.
It is still unclear, as government has never sought to explain, why the issue of the signature bonus would be presented to ExxonMobil at what was described as a “technical meeting.” How it was computed was also queried and Trotman had told the Parliamentary Sectoral Committee on Natural Resources that government determined the sum to pay for legal representation at the International Court of Justice’s case it has with Venezuela over the border controversy.
Jordan said that the border controversy matter was a key factor for business seeking deep water exploration and it hindered getting a deal for the area. “We hadn’t the mentality at the time where government at the then time had the maps and the floor and the geo-satellite things and so on. And even if they had it, as Exxon showed, it was a hit or miss. And finally, we have brushed it aside but there is the issues with our neighbour. Nobody wanted to go near that water, even if it was as far as where they are in the Demerara,” he said. “I don’t want to say whether we are robbed or not. I will say this, though, now that it has been derisked, were we to accept a similar deal with any new contract negotiation, 2% can’t cut it. 2% can never cut it,” he added.
Jordan said that what should be noted are the technicalities that come with each offshore exploration and that it is not as clear cut as the critics would want the public to believe. “Each one of these oil explorations is a different animal. How many companies are doing deep water in a challenged area? How many? So, sometimes, when you see what is being touted in the newspaper, you tell yourself hindsight is 20/20 and have to ask if these people [the critics] are for real… The field is always greener from the other side and you are not seeing it all the time,” he stressed.
Jordan said that throughout history every government faces similar situations where what they believed could have worked when they were in opposition proved otherwise when they got into office. “I remember deceased President Cheddi Jagan saying all kinds of things in 1992, including that we had a dictatorship constitution. And when he came to power in 1992 and they asked him—‘When are you going to change the constitution?’—he said, ‘Well, you know, when you look at it closely, it not that bad. It is really the person.’ So people say all kinds of things when they are not in power to get into power. And when they get in there they find they can’t do what they had been saying when they were in opposition or when they were outside. Our country is replete [with] talkers but when they get into power, they become accommodators…,” he added.
