The Government of Guyana yesterday said it had entered a “fair” agreement with an ExxonMobil subsidiary for the country’s first oil block and it rejected a report by anti-corruption watchdog Global Witness (GW) which said that inept negotiation of the 2016 Production Sharing Agreement (PSA) could have cost the country as much as US$55b.
Among other things, the Global Witness report also called for an investigation of Minister of Natural Resources Raphael Trotman’s handling of the negotiations for the 2016 PSA.
In a statement last evening responding to Monday’s Global Witness report which has aroused concerns about the scale of the possible loss of revenues to ExxonMobil, the government highlighted the main terms of the deal and described it as fair.
“The Government reiterates, as do other credible international agencies, that it entered a fair agreement for the people of Guyana”, it said. It noted that the benefits include:
- 50 per cent profit oil
- 2 per cent royalty
- Withholding taxes
- US$18,000,000 signing bonus
- Over 1900 persons directly employed in oil and gas sector to date
- Over US$300M in foreign direct investment to date
- Over 700 service providers to date
The two percent royalty and the signing bonus are among parts of the agreement that have been widely criticised.
The government said that the Global Witness report is “sensationalist, agenda-driven and extraordinarily speculative. Global Witness presented absolutely no evidence of corruption or malpractice on the part of the Government or its officials.
“The Government of Guyana views the report as a cunning and calculated attack on a sovereign state with a duly elected Government mere weeks before an election. This timing cannot be seen as a coincidence and it appears as though it is seeking to influence the electoral outcome”.
The government statement said that author of the report made the “preposterous assertion” that Guyana “should allow no additional drilling in the Stabroek license” and “should also cancel its nine other allocated licenses and not award any new licenses”.
“This is arbitrary and utterly absurd. On what basis does Global Witness seek to impose its proposition that the people of Guyana must not benefit from our natural resources as the peoples of other countries have done freely for millennia?”, the statement queried.
The Government said it maintains its position that there were geo-political and national security imperatives which could not be ignored in crafting of the deal. This appeared to be a reference to the longstanding Venezuelan claim to Guyana’s territory. The Government said that the GW report deliberately seeks to trivialize the national security and sovereignty of Guyana.
It also argued that Global Witness completely ignored the analyses and reviews done by credible companies such as the Norway-based Rystad Energy (see other story on page 2) and experts including Sir Paul Collier of Oxford University.
The government said that in its report on Guyana, the “widely respected oil and gas analytical firm” Rystad Energy stated, “[i]n the current fiscal regime, the government collects its share through a 2% royalty and a 50% profit oil levy. Rystad Energy estimates that this will give the government 60% of the profit from the various projects (government take). The average government take of 60% in Guyana is indeed favorable when compared to other large offshore producers. [F]or countries that only recently opened up for [Exploration and Production] activities – such as the Falkland Islands, Israel, Mozambique and Mauritania – the government take is in the range of 50% to 65%.”
The government also noted that in responding to the Global Witness report yesterday, Forbes Magazine, a leading financial publication stated, “[i]n the end, just a few hours of analysis reveals the Global Witness report for what it is: An ideologically-motivated attack piece aimed at some of the biggest players in the oil and gas industry. Which, given the group’s history, comes as no surprise at all.”
The government further contended that Global Witness in its report “maliciously attempted” to discredit government officials including Trotman, who were part of a Cabinet approved Government of Guyana delegation, on an official visit to Houston.
“After being heavily reliant on innuendo and conjecture, the report actually states, `Global Witness is NOT suggesting that Trotman’s Texas trip violates US or Guyanese anti-corruption laws,’ and that, `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.’
Global Witness therefore contradicts itself in its own report, the government said.
Further, the government said that Global Witness was unable to establish any corruption or malpractice whatsoever on the part of Government, or any of its officials.
“At all material times, officials of the Government of Guyana acted with the knowledge and authority of the Cabinet and on the basis of credible advice”, the government said.
Not having been able to establish any graft, the government argued that Global Witness then engaged in a flight of fancy. “The figure of $55B is random, arbitrary and highly speculative”, the government declared.
“In fact, the people of Guyana are assured of earning tens of billions of United States dollars in the years ahead and would have unprecedented and bountiful amounts for investment in their wages and salaries, pensions, education, health care, security, infrastructure, sea defence, agriculture, hinterland development and for future generations through Guyana’s already established Natural Resource Fund.
“It is time that the people of Guyana enjoy the right to self-determination and their own destiny without interference of foreign influences”, the government declared.
Finding that Guyana lost out in an “unfairly exploitative” deal with the 2016 revision of its PSA with Exxon and its partners for the offshore Stabroek Block, Global Witness on Monday released the details of an investigation to support its call for government to push for a renegotiation, which it says should also be supported by Washington.
In a report, titled ‘Signed Away: How Exxon’s exploitative deal deprived Guyana of up to US$55 billion,’ Global Witness said that ExxonMobil’s aggressive tactics with inexperienced Guyanese officials saw this country getting only 52% of revenue compared to global averages between 65% and 85% and would see the country losing out on an estimated US$1.3 billion per year.
“The Guyanese government should renegotiate Exxon’s Stabroek oil licence. The government should seek a share of revenue that equates with international standards, increasing Exxon’s financial obligations such as royalty and income tax payments,” the report recommends, while saying that prior to negotiations the government should commission an independent evaluation to determine what the country deserves from the licence.
