Without imputing any wrongdoing on his part, United Kingdom-headquartered Global Witness yesterday released a report calling on 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 an ExxonMobil subsidiary.
Trotman, according to Global Witness, was treated to first class travel, chauffeur-driven limousine rides, stayed at a pricey hotel and dined at the company’s exclusive Wolfgang Puck Restaurant at Exxon’s expense at a time when negotiations for the deal were ongoing and ignored advice by experts.
This newspaper has seen documents which shows that government gave Trotman a per diem for the trip of US$125 per day; where US$100 should go towards food purchase and $25 as pocket allowance.
This country, the report said had could have gotten up to US$55 Billion more over the course of the project, if it had used its upper bargaining position since when the ExxonMobil contract came up for renegotiation in 2016.
“Global Witness does not have evidence that Trotman was unduly influenced by his lavish Exxon meeting. But there is evidence that he negotiated badly for Guyana, one of the poorest countries in the Western Hemisphere. Based on the evidence seen, Global Witness believes Trotman presented Exxon with feeble negotiation terms and ignored expert advice that more financial information was needed before he signed the license,” the report, titled ‘Signed Away: How Exxon’s exploitative deal deprived Guyana of up to US$55 billion’, states.
The report said “Trotman also failed to capitalize on Guyana’s strong bargaining position. During negotiations, he knew that the company was analyzing a new possible oil find. Trotman even knew the company would announce its results on a specific day: June 28 2016. But the minister did not wait for these results, which would have allowed Guyana to assess Stabroek’s true value and which turned out to be one of the world’s largest recent finds. Instead, on June 27, Trotman signed Exxon’s license”.
Stabroek News reached out to the Minister of Natural Resources yesterday, who was up to 2018 responsible for the oil and gas sector, for comment on the report.
He would only say “I was authorized by Cabinet to travel, to sign etcetera” and informed that an official response would have been made public by government later in the day[yesterday], while adding that he had nothing personal to add to government’s statement.
But up to press time the government was mum on the report and no statement was released. Trotman was again contacted and pointed this newspaper to Ministry of the Presidency’s Head of Communications, Mark Archer and Department of Public Information Director Imran Khan. When contacted, Archer said that he was on leave until February 12th and that Khan should be contacted.
Several efforts to contact Khan were futile as calls to his phone went unanswered.
The report cited reasons why it believes that Trotman should be held accountable for Guyana getting the deal it did, saying he knew this country did not only not have expert negotiators but that his terms proposed to company were weak.
Done quickly
Global Witness said that the 2016 renegotiation was “done quickly and apparently without a competitive bidding process” which they admit is not required by this country’s laws. But the organization pointed out that it has evidence that negotiations began on April 4th or 5th 2016 at the Exxon Headquarters, outside Houston, Texas and by twelve weeks later it was completed and signed by Trotman, on behalf of Guyana and Exxon’s Vice President Erik Oswald and representatives from CNOOC and Hess.
“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. ,” the report said.
Although a new Stabroek deal does not appear to have been discussed by Trotman during his April Houston trip, Global Witness states, by June of 2016 the minister was very much engaged in negotiations. “He would not, however, serve as a strong advocate for his country” it said.
“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,” it read.
Trotman’s key terms then were that Guyana should get a two percent royalty on all of the oil produced. This, increase, the report noted, 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 (Block) 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,” it noted.
There is also evidence, Global Witness said 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 the organization, Trotman was aware that Exxon was eager to strike a new deal; and he could have used this as bargaining leverage to get the country a fair deal.
“The company was worried about its license expiring. 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. 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,” it added.
And 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 licence. 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.
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 licence was threatened by Venezuela, he argued, then the US would help defend the company and the country.
Global Witness does not accept Trotman’s justification and reasoning.
“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,” the report said.
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 said that it does not allege that Trotman deliberately negotiated a bad deal, or deliberately ignored information that would in fact have got Guyana a better deal.
However, the organization 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,” the report said.
