The PPP/C government yesterday announced that the tender for the marketing of Guyana’s oil is to be reopened and it also said that gas to energy will be a key priority and that local content provisions will be enshrined in law.
Speaking at a press conference at the Arthur Chung Conference Centre yesterday, Vice President Bharrat Jagdeo steered clear of expectations that the new government will seek to change the controversial 2016 Production Sharing Agreement (PSA) with ExxonMobil’s subsidiary EEPGL which has left Guyana with only a 2% royalty and other impositions which are seen as oppressive.
While Jagdeo did not address the royalty rate or some of the other contentious provisions of the agreement drawn up under the former Granger Administration, he did say that ExxonMobil’s training outlay was paltry considering that this government is aiming to ramp up tutoring of Guyanese on oil and gas.
On Tuesday, President Irfaan Ali signalled a likely tougher stance on Exxon when he told Stabroek News that the approval of the third of Exxonl’s planned wells, Payara, will be put on hold for a review. Exxon has been pressing for swift approvals.
Jagdeo whose job portfolio includes Office of the President oversight of the oil and gas sector, yesterday told the press conference that his PPP/C government has made clear to ExxonMobil its expectations and that the company has to show how this country will benefit from operations here tangibly.
While not saying if leveraging of the approvals for the Payara well will be a strategy to get additional benefits for Guyana, Jagdeo said that ExxonMobil was told of the environmental concerns and local content commitments that will be mandatory.
Prosperity
“There are several issues we see as priority. We made it clear in the meetings with ExxonMobil that we want them to do well here; to make money, but Guyanese must share this prosperity. That it is not sustainable otherwise and we will insist that that happens. Guyanese must share the prosperity. If they are doing well, our people must do well, in terms of employment and opportunities…,” he said.
“That will be the guiding principles and the policy with ExxonMobil and subsequently when we start looking at the other contracts. Several areas we have identified that can bring enormous benefits to our people,” he added.
He explained that while Minister of Natural Resources Vickram Bharrat is in charge of the sector, swift action is in play to ensure the establishment of a Petroleum Commission.
“The Department of Energy will be transferred to them. We made a campaign pledge and spoke on the campaign trail that the Ministry of the Presidency, at that time, must not have a day-to- day responsibility,” he said.
“The idea is to swiftly over the next six to eight months, move to the establishment of a Petroleum Commission as we had said before. The Petroleum Commission will be a mainly technical position. What you need is technical oversight. Some of the best brains, and we hope that Guyanese will be involved there with, of course, some foreign help, until we can train our people,” he added.
The President and his Minister of Natural Resources will ensure that key policy decisions such as local content are first priority and as a result meetings will be held with the Guyanese community to guide decisions.
“Local content will be in the form of legislation, it will be mandatory on the company to comply with the legislation. There will be the best technical inputs before we come up with a negotiating brief that will be cleared at the policy level and then we want to engage directly with Exxon to see that this happens. The President will listen to the entire Guyanese community on developing local content, he said, so that there is no farming out (of) consultations of the local content to junior persons. He will deal with it directly so that he can hear from the Guyanese people,” Jagdeo said.
“We have heard from the Guyanese public. We have seen how labour is treated and these are not for areas of building an FPSO (Floating, Production, Storage and Offloading platform) or areas where we don’t have capacity. So that has to happen, Exxon will have to look at this, we made it clear to ExxonMobil, too, that they can’t claim that it is their subcontractors and we tried to meet provisions. A lot of their work is farmed out to subcontractors who operate here in Guyana, who have been paying our people wages that are discriminatory, not comparable for the comparable skill. And we will insist on that—that they must be paid fairly. We have some of the skills too. Those subcontractors, they have to observe the strict local content legislation when it comes on board,” he emphasized.
President Ali, according to Jagdeo, has insisted that a large number of Guyanese be trained from now so that in the next few years they would have necessary skills.
Warning
It is why government has put ExxonMobil on notice that an annual US$300,000 outlay for training would have to be revised. “We have to assist large numbers of Guyanese and they would have to contribute to that training. We don’t think the paltry sum of $300,000 per year is adequate. We have to find a way to contribute, that our training,” he said.
Turning to the proposal for a gas-to-shore project aimed at significantly cutting electricity costs, Jagdeo said that his government has gathered that ExxonMobil was moving rapidly on this but that the past government had “put the roadblocks in this regard”.
“We have a couple of studies we are going through. We cannot look at what they didn’t do. We have to get it done and we want this done urgently. We have to be guided by the best technical minds but we want this project on the road as early as possible. In that engagement, we will have to get the cost that is very different than is in the contract. The contract locks in a price for the first 300-400 megawatts of power. We need the electricity to generate this country and fulfill the promise that we will cut their electricity bill.
“This is a project of high priority, we want to engage with Exxon…ExxonMobil is eager to move along and from what I gather is, they have been waiting for government to show interest”, Jagdeo said.
But he added that environmental issues for all projects of the US oil major must be harnessed and government will “ensure that we have a commitment from ExxonMobil, because all of these issues are interlinked, a commitment that there will be adequate provisions for any environmental disaster, in the contract and by Exxon. We have to satisfy ourselves that that is so. Flaring [from oil extraction] is a key issue and we have to deal with that. We have already signalled that we don’t want flaring. We don’t want flaring,” he said.
Exxon has flared huge amounts of gas from its offshore operations and is now under close scrutiny from the Environmental Protection Agency.
Expert hired
And to get a better grasp for itself on the scale of works of the Payara project and the possible risk factors, the PPP/C has asked Canada to help with finding an expert to assess the project and advise on the way forward.
That person has already been hired and is expected to give their assessment by the 24th of this month.
“We have made it clear, that consistent with what we have said before; we want to move the production along, but we also wants the country (to benefit) from this,” Jagdeo said.
“We made it clear we don’t want to delay but all the ‘I’s must be dotted and the ‘T’s crossed and we want to make sure that on that issue there is a proper ethical review. That is a technical issue about field development and you need the consultants,” he added.
And to companies that were awaiting the procurement process to know if they will sell this country’s share of crude oil, that process has also been paused.
“We have put a hold on the evaluation of the bids. We made it clear in the campaign that people should not be submitting bids at that time and it would be unfair to people who acted decently, to companies that did not put in a bid because they recognized the threat to democracy. That they now be excluded from the process. We have made it clear that that we will reopen the tender for that contract so all these companies that did not get a chance to bid that they can bid,” he said.
