Adamant in its stance that it will not renegotiate the 2016 Stabroek Block Production Sharing Agreement, the PPP/C government says that it is “fully aware” of amendments to the contract but does not share the view that it serves as a precedent for further changes to the fiscal regime.
Instead, government said that the nation can be assured that the new PSA it is crafting to serve the anticipated upcoming auction and beyond, will ensure more revenue that the current contract.
“The government is fully aware of the amendment made to the 2016 PSA by the former APNU+AFC government, dated April 26, 2019,” a statement from the Ministry of Natural Resources yesterday announced.
“…The recent reports in the media present that the 2019 amendment to the PSA sets the precedent for the renegotiation of the entire contract between Guyana and ExxonMobil. The government reiterates that the contract will remain fiscally unchanged for the country and investors’ benefits,” it added.
While no name was mentioned, the statement referred to views expressed by chartered accountant, Christopher Ram, who last week made public the amendments to the 2016 PSA, saying that not only have both governments been silent, but that it dispels both governments’ reasoning that the contract cannot be changed.
Ram, on Thursday, secured a copy of an addendum to the PSA, which was amended in April, 2019, to make clear that ExxonMobil Guyana and its partners could not reclaim the 2% royalty due to Guyana as costs. As a result, Ram said that the amendment sets a precedent that the contract can be renegotiated.
“The question inevitably arises why the current Administration keeps repeating the mantra of sanctity of contract, driving fear into Guyanese of the consequence of any attempt at renegotiation. Interestingly, the APNU+AFC’s renegotiation was conducted without a change in circumstances, while the incumbent Administration is adamant that it is powerless to even broach the question with the oil companies,” Ram noted in his column, ‘The Road to First Oil,’ published in Friday’s Stabroek News.
Already, main opposition spokesman on the oil and gas sector, David Patterson, has said that while it is proof that the existing contract can be renegotiated, it requires the necessary political will.
Ram has said that the coalition must be given some credit “for at least effecting the renegotiation of one element of the Agreement, albeit not a particularly major one.”
Ram said that the nation, which is facing price increases in every area including the energy sector, should pressure all stakeholders to ensure that the contract is renegotiated, as he faulted both sides for the current situation the country is in.
“It is both the PPP/C and the APNU+AFC that have given Guyana this abominable contract. Contrary to what Vice President Jagdeo said a few nights ago on the Glenn Lall Show, the 2016 Production Sharing Agreement was based on the Robert Persaud – Donald Ramotar 2012 Model. How can we better manage a contract when we know not its origin, its content, or its implications?” he questioned.
“Indeed, it is still my strongly held view, that Esso was not entitled to a second Agreement. We may not be able to reverse the 2016 Agreement, but that should not mean that we have to prostrate ourselves at the feet of Esso, Hess and CNOOC, as our leaders are doing. Let us take the example of the APNU+AFC and demand renegotiation,” he added.
The MoNR statement pointed out that government understood the changes made. “The amendment saw that ExxonMobil Guyana is disallowed from recovering, through cost oil, the two per cent royalty to be paid to the nation. This modification has been implemented and enforced through the mechanisms on the payments for royalties and cost recovery conditions, and the monitoring features which set out for the governance of the cost bank regarding the projects subject to petroleum operations.”
It pointed out that government wanted make clear that the model PSA that is currently being developed “will garner more economic benefits for the nation and its people.”
The statement said that “The model PSA being developed will be adapted for all new petroleum activities offshore Guyana – whether it be for exploration or production operations. This includes the upcoming competitive bidding round that the government intends to host in the last quarter of this year and other commercially viable discoveries that will be made in other oil blocks. The 2016 model or any previous PSA will not be applied to any other oil block where a discovery has been made.
“The government is of the view, as has been underscored by His Excellency Dr Mohamed Irfaan Ali and Vice President Dr Bharrat Jagdeo, that if specific fiscal considerations are amended in the current PSA, then that could impose unfavourable effects on current and future investments in Guyana, given the current world petroleum economy,” it added.
Highlighted was that position has and “will continue to be, that the 2016 PSA, shared between ExxonMobil affiliate Esso Exploration and Production Guyana Limited (EEPGL) and its partners, remains without a renegotiation as in keeping with contract sanctity. Notwithstanding this, the licencing for every new field to be developed since 2020 has seen significant improvements in both environmental and fiscal benefits for Guyana. This will continue to be the trend for all new investments in the Stabroek Block until the contract renegotiation period is reached.”
Government said that it respects the investments made by the petroleum consortium in the Stabroek Block and “will continue to work assiduously, through various agencies, on every additional licence and environmental permit as has been for Payara and Yellowtail developments. These projects have shown that with the prudent management of the oil and gas sector, Guyana can garner more economic and social benefits for improved intergenerational equity of the local economy.”
