It is completely unsurprising that ExxonMobil continues to fend off widespread calls for it to enter a renegotiation of the 2016 Product Sharing Agreement (PSA) with the Government of Guyana to enable the people of this country to have a greater share of the wealth derived from their natural resources.
After all, Exxon is laughing all the way to the bank. Its confirmed profit for the year 2022 hit an historic high of US$56b, triggering revulsion – not from the Guyana Government – but the Biden administration.
Months after President Biden had famously said that Exxon was earning more than God, the White House denounced the level of the company’s 2022 profit as the US struggles to bring inflation down.
A White House statement on January 31st said Exxon’s profit margin was particularly galling as Americans paid record high prices at the pump. It criticized attempts by Republicans in the House of Representatives to push policies aimed at supporting the oil industry, Reuters reported.
“The latest earnings reports make clear that oil companies have everything they need, including record profits and thousands of unused but approved permits, to increase production, but they’re instead choosing to plow those profits into padding the pockets of executives and shareholders while House Republicans manufacture excuse after excuse to shield them from any accountability,” the White House said.
So on February 9th when he was asked at a press conference in Kingston about renegotiation in light of the oppressive deal, Exxon’s country manager Alistair Routledge delivered the boilerplate response so characteristic of this company.
He said that with US$30 billion already invested in the production of oil and gas, it would be “very destructive” to investor confidence for Esso Exploration & Production Guyana Limited to renegotiate the 2016 PSA.
He added: “We take an investor risk and what those terms usually reflect is how much risk you are taking. And if you recall, when we signed the contract, we made one discovery, Liza, nothing else. The system is truly still a frontier exploration base.”
It will not be “very destructive” to investor confidence to renegotiate the PSA considering that the area has been completely de-risked, that dozens of world class finds have now been made, over 11 billion barrels of oil equivalent are to be tapped at this point and the market dynamics in the medium to long term look very favourable.
Convincing Exxon that it has to return to the table to improve the terms for the people of this country requires determined action by the Ali administration but for some inexplicable reason it prefers to see the benefits due to the people of this country carted off in the billions of US dollars by Exxon and its partners, Hess and CNOOC. It is not that the government is without leverage. It would be well within its right to adumbrate a depletion policy which would govern the rate of oil extraction. Further, each and every new oil platform that Exxon covets in the Atlantic requires a series of permissions and approvals by the government and various bodies including the Environmental Protection Agency. At any number of points the government can table the argument that the mindless 2016 PSA signed by its predecessor could never have been envisaged to govern discoveries of 11 billion barrels and potentially far more than that by the time Exxon is finished with its gimlet-eye examining of every square inch of the Stabroek Block that it has held for so long and with acreage far in excess of what the law had permitted in 1998.
Instead, President Ali has become a virtual cheerleader for maintaining the status quo. At two events recently – the launching of the Guyana Shorebase Inc’s new berth and at the Guyana Energy Conference, the President made the wholly absurd argument that a renegotiation of the deal could have resulted in a shutdown of operations in the Atlantic. He also spoke of honouring the deal his government had met. How does one honour a throughly dishonourable and rigged deal? A deal that remains ripe for a commission of inquiry which Mr Ali’s government would be quite in order to pursue.
The President however remains unconvinced.
“We came in to government and met what we have said publicly is a lopsided agreement, but we have a responsibility to honour an agreement that was made. I spoke about the consequences of walking away. I saw a completely different headline from what I said,” Mr Ali told the opening of the Guyana Energy Conference.
“Let us say we stopped production tomorrow; stopped all the production. What is the consequence? What is the exposure to the country? What is the exposure [to] all those who would have invested? Not just the big investor; to the man who took a loan and build apartments, the man that had three taxis and invested in 300 taxis now… what is the exposure to them, and the financial institutions that financed those investments based on what we did?”
The President need not bother about that. Exxon will not walk away and has to be amenable to reasonable changes to the PSA to take account of the vast new discoveries. Why won’t President Ali recognise this?
