Dear Editor,
“”Renegotiation” can be very difficult if not legally impossible unless agreed to by both parties”, says Matthew, SN daily blogger. (See his blog at the end of Dr. Jailall’s letter in SN, Dec 28th). Why is it difficult? It is written in black & white in the oil contract that it can be renegotiated, providing both parties agree. What does this phrase “providing both parties agree” really mean? Has the gov’t ever asked Exxon to come back to the table? Has the gov’t articulated reasons for renegotiation? On the contrary we see the gov’t defending the contract. Mr. Jagdeo’s White Paper issued by DPI (Nov 2021) under Kemol King’s byline mentioned (a) Sanctity of Contract; (b) Investors will shy away from Guyana if you dare to seek renegotiation (c) Go to previous gov’t, ask them to renegotiate. These are all palpably false reasons offered up to back up gov’t’s position of No Renegotiation. In fact, all three reasons are outrageously false and funny.
Mr. Jagdeo’s White Paper is a load of horse dung – defending the contract with all false reasoning, rather than articulating reasons for renegotiation [lopsided contract – 2% royalty 75% Cost Recovery leaving a miserly 25% for profit sharing; fraudulent items like gov’t paying taxes for oil companies and issuing tax receipts]. Oil Companies are making $billion in Windfall profits. Where does the contract say Windfall profits cannot be shared with host country? UK gov’t is levying taxes on Windfall profits. Guyana owns the resource, and still, VP Jagdeo is afraid to seek renegotiation to share in the Windfall profits. An honest, competent leader would take a cue from the British Gov’t. and seek fair value for the Guyanese people. His duty is to the Guyanese people, not subservience to Exxon. What is done in plain sight is that Mr. Jagdeo is sucking up [ingratiating himself] with the oil company for some kind of gain. What might that be? Help him to hold onto power, maybe? Mr. Norton says the word “renegotiation” is not in his vocabulary. Is Exxon playing these two leaders for a song, knowing the country is racially divided – and these two men are locked in a racial power struggle, each looking/ being promised help from Exxon? Looks like Exxon is playing these two men, taking advantage of the racial power politics. A PSA, Production Sharing Agreement contract that runs for 30 or more years is different from say, a contract to buy a house or car. The latter is consummated in a short time, say 6-months and it is over, done. The question of renegotiation is rarely needed or ever arises.
A PSA is very different animal – goes on for 30-years, and market conditions (world market demand could decline, or oil price could rise from an average of $65 to a new average of $100) could change significantly to warrant/justify renegotiation. This safety valve is available to both parties, so that some sort of fairness can be restored. Hence the reason why the clause allowing for renegotiation was written into the contract. It is an act of betrayal of its people for the gov’t of a host country to read such a contract and conclude: Not renegotiation. Absolutely not. I believe the GoG is misreading the PSA, and does not have a good, clear understanding of the value of its oil resource. Trading away the value of your oil resource for a chance to hold onto power with the help of Exxon is a grievous thing. Gov’t should use the bully pulpit (TV, radio, press) to explain to the Guyanese people why this contract cannot be renegotiated.
When President Irfaan Ali says, “Negotiating with an oil giant is like negotiating with a superpower”, he should explain what he means by that statement. Governments around the world do negotiate with superpowers America, Russia, China all the time. And, governments do negotiate/renegotiate with oil giants all the time. Two prominent Guyanese with expertise in the Oil Business – Dr. Vincent Adams, Dr. Jan Mangal – have expressed the belief that Guyana’s PSA with Exxon can be renegotiated. It is just that VP Jagdeo chose not to articulate reasons for renegotiation, instead opting to defend this egregiously lopsided contract for some kind of benefit known to himself only and not known by the Guyanese people.
Sincerely,
Mike Persaud