Former auditor general Anand Goolsarran has said that it is unfortunate that President Irfaan Ali continues to use “sanctity of contract” as a reason to not look into the 2016 Petroleum Sharing Agreement (PSA) between ExxonMobil’s subsidiaries and the Government of Guyana, which is heavily weighted in favour of the US oil giant.
“No one is suggesting that we should not honour the terms and conditions of the agreement, and attempts at renegotiation do not in any way adversely affect the PSA currently in force,” Goolsarran said in his ‘Accountability Watch’ column published today in the Stabroek News.
According to the former auditor general once renegotiation is successful, the contract is amended, and all parties are bound by the amendment. “If renegotiation proves unsuccessful, then we will have to live with the existing contract. But at least we should make an honest and genuine attempt… Over the years, Trinidad and Tobago has successfully renegotiated several of its oil contracts,” he added.
Goolsarran said that on several occasions he referenced Article 31.2 of the agreement which states that the PSA can be amended or modified with the written consent of all the parties. He pointed out as well that the PPP/C 2020 election manifesto specifically stated that if the party won the elections, it would renegotiate the agreement. The relevant section read: “Even the lead government minister [under the APNU-AFC Administration] responsible for the sector, has admitted that in retrospect Guyana got a bad deal… To ensure that oil resources [are] managed responsibly, the PPP/C will: Immediately engage oil and gas companies in better contract management/re-negotiation….”
He commented: “One wonders how many persons from the electorate might have been influenced by the above statement in deciding which political party they would support in the 2020 elections.”
Identifying the lopsided nature of the PSA, Goolsarran pointed out that it provides for, among others: (i) the payment of a mere two percent royalty on production; (ii) a deduction of 75 percent of the value of crude oil produced to cover Exxon’s cost of operation (cost oil), while the balance (profit oil) to be shared equally between Exxon and the government; (iii) the recognition of pre-contract costs of US$460 million covering the period 1999 to 2015 as recoverable costs; (iv) absence of ring-fencing provisions; and (v) generous tax concessions that include the requirement for the government to discharge Exxon’s tax liabilities from its share of profit oil.
In contrast, Suriname’s PSA with TotalEnergies provides for: (i) 6.25 percent royalty on production; (ii) profit split based on a certain formula that ensures “the higher the oil price the better” for Suriname, but the lower the oil price the contractor “gets protected”; (iii) a tax rate of 36 percent; and (iv) non-recoverability of pre-contract costs and interest on loans for the purpose of determining the value of cost oil.
While being interviewed by New York Times International Climate Correspondent Somini Sengupta on September 25 during a visit to New York the President was asked to address the issue and he doubled down on the claim that there was nothing his administration could do to change the inherited deal.
The journalist pointed out that Guyana’s own citizens have been very critical of the deal Guyana made with the ExxonMobil-led consortium of oil companies. Citizens, she said, have also criticised the Environmental Protection Agency (EPA) for not carrying out sufficient environmental assessments among other issues such as Guyanese taxpayers being left liable in case of oil spills as a result of the liability insurance the oil companies are allowed to carry. She even referred to the High Court ruling where Justice Sandil Kissoon found that the EPA was derelict and pliant and that its decisions put the citizens and environment in peril.
Ali began his response by saying,“democracy is a beautiful thing and I will continue to ensure that those citizens and everyone has the right to say what they have to say.
“But let us look at the facts, yes citizens say that. You are talking to a leader of a country that by policy has determined that we are going to keep our forest intact. A forest the size of England and Scotland, with the lowest deforestation in the world. We have kept that intact and we are continuing to keep that intact. You are talking to a leader of a country that is saying to you that by policy we are going to double our area of biodiversity by the end of next year and we are going to achieve the 30% long before 2030.”
The journalist then countered that his answer did not address the issue about the oil pact. However, the President maintained otherwise adding that the reality is that by policy design the country is keeping the forest intact which is important for the planet.
He stated that his government inherited the oil agreement and as leaders they have to consider the sanctity of contracts and questioned whether he could just abandon the contract because then “right on this stage you will say there is a tyrant and dictator in Guyana who does not respect contracts. Who does not respect the sanctity of contracts. And then you might hear that Guyana will be called before every commission globally”.
He then said his government was focusing on how it can maximise the provisions of the inherited oil contract to the benefit of the country and environment.
“You have inherited this deal, was it a bad deal?” questioned the journalist.
“I have said it a number of times, they had the better hand of the deal,” the President responded.
“Okay, is there any universe in which you would renegotiate this deal or is that off the table?” the journalist asked.
‘So, we have said all future PSAs will be different … This is now the standard. We have already drafted new PSAs through consultation and expert advice… and if you examine the new PSAs you will see that they are substantially different from what the consortium enjoys. And that is the fact…,” the President said.
