It was hardly surprising that the fifth year of oil production evoked barely disguised triumphalist declarations by ExxonMobil Guyana. After all, the US oil major is laughing all the way to the bank and envisages decades more of this great carrying away of the national patrimony while the PPP/C government watches on disinterestedly and in gross dereliction of its obligation to the people of this country and future generations.
ExxonMobil is completely unmoved at the inequity and iniquity of the Production Sharing Agreement (PSA) it foisted upon the APNU+AFC government in 2016. Yesterday was a day of celebration for it and chest thumping.
“Since `first oil’ at the offshore Liza Phase 1 project five years ago, Guyana has become the third largest per-capita oil producer in the world. The oil-and-gas sector has spurred tremendous economic growth in Guyana, helping to elevate the country to one of the fastest-growing economies globally”, ExxonMobil exulted.
It did point to 6,000 Guyanese being employed in what it said were “good-paying industry jobs” and that the oil company and its suppliers have invested more than US$2b to acquire goods and services. No matter these figures, they pale in comparison to the massive profits being creamed off of this country’s oil by ExxonMobil and its two partners in the Stabroek Block – Hess and CNOOC.
ExxonMobil actually had the gumption to say that it was doing its part to foster a brighter future for all Guyanese and that it “celebrates this five-year milestone as a shared achievement, and we look forward to continuing our successful collaboration with the people of Guyana.”
At the time of the writing of this editorial there had been no complementary statement from the Government of Guyana. Its spectacular failures in the management of its relationship with ExxonMobil and shepherding of this country’s resources would be difficult to conceal in any such statement.
Just as how former President Granger must be held liable for the atrocious 2016 PSA so too must President Ali be held fully accountable for the stasis in forcing ExxonMobil back to the table and improving the terms of the deal.
Ever since its stealthy formulation and secreting away from the public, the 2016 PSA has become the rallying point to make right the abject surrender of the country’s resources to ExxonMobil and the incomprehensible delinquency of both the APNU+AFC and the PPP/C governments. It is the PPP/C government and President Ali who must now be held accountable for why ExxonMobil has not been brought back to the table. `Sanctity of contract’ is a worn-out shibboleth that has no place in the lexicon that should govern relations with ExxonMobil. There is an irresistible case to be made in any number of fora – even as far as arbitration – that Guyana was unconscionably exploited at the negotiating table – if you can call it that – and that the PSA is a shameless rip-off which should no longer stand. There are also innumerable opportunities for the Government of Guyana to apply pressure on ExxonMobil that would make it see sense in improving the terms of the deal, the obvious one being the process for approving new oil extraction projects.
The 2016 PSA must be amended to improve the royalty rate, enshrine ring fencing and to expand the profit accruing to Guyana as the level of extraction increases. The PPP/C flattered to deceive in its pre-election talk about the 2016 PSA and is now the toothless poodle and de facto partner to ExxonMobil. With election manifestos being drawn up, the electorate must demand from the contestants clear declarations of their intentions as it relates to the 2016 PSA.
Not only has the government abdicated its responsibility to move to improve the terms of the deal, it has also failed – despite an explicit promise – to create a regulatory framework and commission for the oil and gas sector. It wants no regulatory attachment to the plans of ExxonMobil for so-called `de-bottlenecking’ of oil wells and the recklessness of expanding oil output without reference to Guyana’s needs and international climate change obligations. The absence of the promised Petroleum Commission is a fundamental breach of the tenets of good governance and obviously aimed at enabling ExxonMobil’s designs. Its absence can fuel an unduly permissive atmosphere where little account is taken of risk and dangerous practices. Such slackness could lead to catastrophic consequences.
On the insuring of the country from severe potential damage from a blown-out well or other such disasters, Guyanese have witnessed the government allying itself with ExxonMobil to challenge a High Court decision that was eminently in the favour of this country. That one action alone calls into question whether government is really working in the interest of the people or ExxonMobil and unchecked oil extraction.
In recent days the mind-boggling extractions from the Natural Resource Fund (NRF) and their melding with the Consolidated Fund have raised questions about the utility of the NRF Board and the mechanism for determining national priorities. It has been the position of this newspaper from the outset that the formula that was enshrined in the PPP/C Government’s version of the Natural Resource Fund Act effectively neutered the NRF Board. It has no real function except to sign off on matters pre-ordained for it and to table reports in Parliament. It is a rubberstamp.
In this year’s budget the situation worsened. The government passed an amendment to increase the amount of money taken from the NRF completely ignoring the need for intergenerational equity, the wisdom of higher savings for emergencies and the risk that the huge injections into the economy would not be properly absorbed thereby inviting wastage and corruption. The best practice would have been the assigning of oil funds in such a manner that the public could easily see which projects were being spent on and who was to be held accountable for spending. As it is now, oil revenues are sinking into a black hole with scanty evidence of how the spending decisions are being made and whether they are prudent and part of a cogent plan. The crash grant announcement epitomizes the lack of planning and the inabilities of this government.
The woes of the country don’t end there. The benighted PSA has bequeathed a formula which allows ExxonMobil and company to take 75% of oil production to cover their expenses – what has been termed as cost oil. This assignment can end up being the biggest unchecked drain on monies due to this country if the judiciousness of the claims of ExxonMobil is not established. The early signs are not good and point again to unseemly collaboration between ExxonMobil and the PPP/C government. The first audit of expenses by UK audit firm IHS Markit was kept hidden from public view by the government until Stabroek News breached this blackout. The final version of the report after reconciliations was submitted to the PPP/C government in March 2021. That report remained hidden from public view until a news item on its findings appeared in the April 2nd 2023 Sunday Stabroek.
Among the major findings in the audit report was that 12.8% of the US$1.67b expenses claimed by ExxonMobil and its partners could be disputed by the Guyana Government. The percentage that can be queried translates to US$214.4m. Yet, to date, ExxonMobil is still to make good on ensuring that Guyana is credited with US$107m in profit. Moreover, a clandestine and illicit attempt by ExxonMobil and a senior official in the Ministry of Natural Resources to have that figure cut to near zero had to be abandoned after reports in this newspaper. Since then, the government has recruited a local consortium to evaluate much larger expenditures and serious questions have since been raised about the quality of the consortium’s work. That has however not stopped the authorities from awarding them with a second contract. Unbelievable.
Finally, it has never been more important than now for every Guyanese to become seized of the issues pertaining to the oil industry and the enormous inflows. They are stakeholders in and custodians of Guyana’s wealth. In that respect they are equal to the PPP and the PPP/C government. There is clearly an ethno-political divide as there is on many things. Supporters of this government are prepared to give it carte blanche to do as it pleases particularly as this could result in its return to office. Supporters of the opposition will cleave to the view that everything occurring in the oil industry is against the grain of good governance. The reality is a composite but no matter in which direction it leans, it is clear that this government has to be held accountable. It believes that its electoral victory in 2020 has empowered it to behave as if it is a one-party government on seminal issues like the PSA, an oil depletion policy and the NRF. It must recognize the folly of its ways and the people have an important role in this. It has thus far been five years of oil and infamy.
