Under the apt theme ‘Charting a sustainable energy future’, the International Energy Conference and Expo Guyana’ is set to get underway tomorrow with an impressive list of attendees including the Presidents of Ghana and Suriname and the Prime Minister of Barbados.
Guyana’s President Irfaan Ali is to deliver the keynote address and also expected to be in attendance is Darren Woods, the Chief Executive Officer of ExxonMobil, the lead partner in the gigantic oil finds in this country’s Atlantic waters and the extraction now taking place.
Everything seems to have been lined up precisely for this conference. The 2022 budget has been approved, the Natural Resource Fund can now be accessed, the second oil production platform has been inaugurated and even the COVID-19 curfew is now over.
Undoubtedly the private sector companies which will be represented in droves at the four-day conference are interested in only one thing: how to maximise their opportunities here and profits from Guyana’s oil and gas bonanza. There should, however, be a long collective pause to consider how Guyana and its people are being undermined by the very deal that all of the assembled businessmen hope to profit from.
This undermining and exploitation has been engineered with the acquiescence and complicity of two governments: APNU+AFC between 2015 and 2020 and the PPP/C since August of 2020. The grouses are serious and Mr Woods, in particular, should examine his conscience to determine whether his company and its partners should not immediately provide redress.
The primary source of concern is the unjust 2016 Production Sharing Agreement (PSA) which ExxonMobil and its negotiators forced upon this country and its people. Why Guyana assented to these terms in 2016 is an area that remains ripe for investigation but neither the APNU+AFC administration nor this government has been prepared to do what is right for the people of this country. Mr Woods and all of those who will be in attendance at this conference should be aware that the 2016 PSA was wrung from the country at a time when it was without a single recognised expert in negotiations of the type that yielded the agreement.
Among the grossly unacceptable features is the paltry 2% royalty. Considering that the 2016 PSA replaced a pre-oil deal and was struck following a major find with another to be announced a few days later, the royalty rate should have evidently been higher. Under pressure from ExxonMobil and its partners when Guyana was actually in a strong negotiating position, the APNU+AFC government caved into a disastrous deal.
Another unpalatable feature of this deal is the open-ended cost recovery period for which as much as 75% of oil production is earmarked each year. Guyana is then left with half of the annual 25% of profit oil. These iniquitous terms prevail no matter how many oil platforms are installed. Guyana’s take of the profit oil remains the same percentage whether it is 120,000 barrels or one million barrels pumped per day. This is completely unacceptable. ExxonMobil speaks tritely about the possibility of ten platforms in the Atlantic without the slightest concern that each platform magnifies risks to Guyana.
There are no ring-fencing protections in the 2016 PSA which in theory means that ExxonMobil and partners could continue assigning what should be profit oil for Guyana to failed wells and other expenses. To make matters worse, Guyana pays taxes for ExxonMobil and its partners.
Exxon’s oil extraction operations are now occurring at two wells without the full insurance coverage that this country should have considering spectacular well blowouts that have occurred in other parts of the world. Having entered office in August 2020, the PPP/C administration was in an excellent position to ensure that this matter was frontally addressed. It has failed to discharge this responsibility.
To make matters worse, ExxonMobil, this multi-billion US dollar behemoth has suffered gas compression equipment failure for most of its oil extraction here since December 2018, resulting in the spewing of climate-endangering gas into the atmosphere. Rather than shut its operations down until it could comply with best practices, Guyana has permitted the company to monetise its pollution for a paltry sum.
The Government of Guyana itself is contributing to climate change concerns on several grounds. The most egregious and vulgar of these was the greenlighting of the destruction of acres of valuable mangroves on the West Demerara to entertain the beginnings of a shore base company for the oil and gas industry.
On a different scale, the government is adamantly pursuing a huge gas-to-shore-to-energy project without the benefit of a comprehensive purpose-built feasibility study that also examines the polluting gases that will be released and whether the better option would not be to leave it in the ground as a reflection of the country’s commitment to the Paris Climate Change agreement. Any such project will be studded with any number of environmental and other risks which are still to be properly weighed.
Poor governance is evident on the government’s part considering that the regulatory commission for the petroleum sector is still to be established despite the fact that production has begun at a second platform. More than 18 months of the life of this government have already elapsed but the Petroleum Commission is still to be established.
While Guyana should have every opportunity to develop its oil resources, at the other end of the scale is the irresponsibility of not having a depletion policy. ExxonMobil and the government are in lockstep to extract as fast as possible all of the oil in the Stabroek Block. This is understandable for ExxonMobil but completely reckless for the Guyana Government given the climate change imperatives.
Among other examples of shockingly poor governance is Guyana’s failure to audit US$9.5b in the claimed expenses of ExxonMobil and its partners. The disallowing of any of those expenses would result in more profit oil for Guyana and would put the oil companies on notice that they can’t easily dupe the people of this country.
So while this conference contemplates multitudinous forms of enrichment, the government of this country and ExxonMobil and its partners have a lot to be accountable for in ensuring justice for Guyana and its people.
