Without imputing any wrongdoing on his part, Global Witness today called for the Guyana Government to investigate the role of the Minister of Natural Resources, Raphael Trotman in the negotiation of the much criticized 2016 Production Sharing Agreement (PSA) with ExxonMobil.
The key finding of its report on Guyana’s oil sector issued today is that the poor 2016 deal could have cost this country as much as US$55b. The report said that Trotman did not serve as a strong advocate for the country, knew that Guyana had a strong negotiating position and had been advised by experts to seek more information before signing off on a deal.
Stabroek News has contacted Trotman for a comment on the report’s findings and he said that he is studying them.
An excerpt from the Global Witness report `Signed Away – How Exxon’s exploitative deal deprived Guyana of up to US$55 billion’ now follows.
Although a new Stabroek deal does not appear to have been discussed by Trotman during his April Houston trip, by June 2016 the minister was very much engaged in negotiations. He would not, however, serve as a strong advocate for his country.
Global Witness has seen a list of Guyana’s negotiation terms that were authored by Trotman and dated just before he signed the Stabroek license. These terms demonstrate that, as of late June, the minister was failing to ask for a sufficiently good deal. His key terms were:
– Guyana should get a two percent royalty on all of the oil produced. This was only a slight increase to the one percent royalty required by the 1999 license. Trotman’s terms do not include a section on the government’s share of oil production, and it appears – at least in late June – that Trotman was not negotiating for an increase in the 50 percent production share contained in the 1999 license. In total, the minister’s position was that Guyana should obtain a 52 percent share of Stabroek revenues, far below the IMF’s suggested 65 to 85 percent.
– Guyana should receive an US$18 million signature bonus and US$2.1 million in annual fees, including US$800,000 for environmental and social protections. For a deal ultimately worth nearly US$325 billion, these terms were paltry.
Trotman had reason to know that his Stabroek negotiation terms were weak. On Friday June 24, prior to signing the deal, he sent the terms to an oil industry expert for review. Working quickly, the expert responded
on Monday the 27th. In a brief, the expert told Trotman that Guyana needed far more information about the value of Stabroek and what a fair deal would be.
Around the same time, Trotman requested advice from a second oil expert. According to the expert, he also told Trotman that the government needed more information about the economics of Stabroek before signing and even suggested where Guyana could get money to
hire advisors.
Both sets of recommendations were apparently dismissed.
On June 27, only one business day after Trotman sent his request to the first expert and the same day the expert replied, the minister signed Exxon’s license. The final deal largely mirrored the same generous fiscal terms Trotman had offered earlier in June, although the company had reduced its annual environmental and social obligations from US$800,000 to US$300,000.
(The company will pay up to an additional US$300,000 annually in job training.)
There is also evidence that Trotman was aware Guyana was negotiating from a position of strength, but failed to capitalize upon Exxon’s weak hand. First, according to evidence seen by Global Witness, Trotman was aware
that Exxon was eager to get a new deal. The company was worried about its license expiring.108
Second, Trotman knew Exxon would soon announce the results of its newest exploration well – Liza 2 – informing Guyana just how valuable Stabroek would be. In May 2016, Trotman wrote that Exxon had “encountered” “hydrocarbon shows” at Liza 2 and that he understood Exxon would announce its results on a specific day: June 28 2016.109
Yet Trotman does not appear to have effectively used this information to Guyana’s advantage. Global Witness is not aware whether Exxon told Trotman or other Guyanese officials about its Liza 2 find before the company announced them publicly. However, if Exxon did not, then Trotman signed Stabroek only one day before he believed Liza 2 – one of the world’s largest recent oil finds
– would be announced.
Of course, if Exxon had told Trotman about Liza 2 before he signed, then the minister approved a deal with weak fiscal terms despite knowing that Guyana was now a leading oil hotspot.
Ultimately, Exxon did not publicly announce Liza 2 on June 28. But the company did not wait long: only two days later, on June 30, Exxon announced Liza 2 and for the first time told the world just how much oil it had found in Guyana – then estimated at up to 1.4 billion barrels.110
Like Foreign Minister Greenidge, Trotman has stated that getting maximum revenues from Exxon during the 2016 negotiations was not the government’s main aim. In an August 2019 email to Global Witness, Trotman acknowledged that Guyana “could have done some things much differently.” But the country’s principal aim, he said, was to ensure that Exxon remained in Guyana, developing and producing its oil finds. Among other reasons, Trotman felt that the company could help Guyana in its border (controversy) with Venezuela. If Exxon’s license was threatened by Venezuela, he argued, then the US would help defend the company and the country.
Yet whatever concerns Guyana may have about Venezuela’s border claims, Global Witness believes they do not justify Trotman’s signing of the 2016 Stabroek license on the terms proposed. The deal was the largest in Guyanese history, and Trotman apparently rushed to sign it before the Liza 2 announcement despite soliciting advice from two experts who said he needed more information. He also knew that Guyana had a strong bargaining position, yet negotiated terms that could lose Guyana up to US$55 billion, according to OpenOil’s recent analysis.
In December 2019, Global Witness asked Trotman why he apparently ignored expert advice and Guyana’s strong negotiating position during negotiations with Exxon. The minister did not respond to this letter.
Global Witness does not allege that Trotman deliberately negotiated a bad deal, or deliberately ignored information that would in fact have got Guyana a better deal. Nevertheless, with the above concerns in mind, Global Witness believes the Guyanese government should investigate Trotman’s role in the 2016 Stabroek negotiations. If it is determined that he or others did not represent Guyana well during these negotiations, or there is other evidence of wrongdoing or incompetence, those involved should be held accountable.