Call made for public inquiry into Raphael Trotman’s signing of 2016 PSA

A call has been made by the Guyana Trade Union Congress (GTUC) for a public inquiry into former Natural Resources Minister Raphael Trotman’s signing of the much-maligned 2016 Production Sharing Agreement (PSA) with oil giant ExxonMobil.
GTUC issued this call as part of its proposals for the Government to implement in Budget 2024 next year. In their proposal, they also called for a public inquiry into the exploration agreement that late President Janet Jagan signed with Exxon in 1999.
According to GTUC, the Government should “hold public enquiry into the ExxonMobil agreements signed by President Janet Jagan and Minister Trotman to determine the differences so that action could be taken.”

When the Petroleum Exploration Licence was issued to ExxonMobil in 1999 under the hand of then President Jagan, it was issued at a time when Guyana had not found any oil despite decades of exploration and the Stabroek Block was still seen as a high-risk venture for investors.
By 2016, however, Exxon had already found oil in the Stabroek Block the previous year and Guyana had been significantly de-risked. Despite these factors, the former A Partnership for National Unity/Alliance For Change (APNU/AFC) Government failed to capitalise on these advantages to substantially improve the terms of the agreement.
After a trip to Exxon’s headquarters in Houston, Texas, in April 2016, Trotman in his capacity as Natural Resources Minister signed an agreement with ExxonMobil that increased the royalty Exxon would have to pay from one per cent to a mere two per cent. Additionally, the 2016 agreement increased the profit share from 50 per cent in the 1999 agreement to a mere 52 per cent.
Since the signing of this agreement, Trotman’s actions in not securing a better deal for Guyana have been scrutinised and criticised, with United Kingdom-based Non-Government Organisation (NGO) Global Witness in February 2020 calling on the then APNU/AFC Government to investigate the matter.
Since the People’s Progressive Party/Civic (PPP/C) Government came to power in August 2020, it has been fixing many of the loopholes and gaps in the management of the oil and gas sector. This includes a model PSA, which all future agreements with oil companies will have to follow, thereby ensuring better terms for Guyana.
Under new conditions, Guyana stands to benefit from as high as a US$20 million signature bonus for the deep-water blocks and US$10 million for the shallow-water blocks. Additionally, all future PSAs will also include the retention of the 50-50 profit-sharing after cost recovery; the increase of the royalty from a mere two per cent to now a 10 per cent fixed rate; the imposition of a 10 per cent corporate tax, and the lowering of the cost recovery ceiling to 65 per cent from 75 per cent.
It was only on Friday that President Dr Irfaan Ali, during an event, reaffirmed the Government’s position on the 2016 agreement. While there have been calls for renegotiating it, the Government has noted that this could tank Guyana’s reputation as an investment destination. The President also referenced the Government’s efforts to make the most out of the bad hand Guyana was dealt by the former Government.
“I wish it was a better contract; all of us wish that. We’ve been given a bad hand; we have to correct it now. We have to ensure that the future hands are not that bad, and we are in a better position to call the shots. You got to be realistic sometimes; not opportunistic!” President Ali said.
“This is not a plaything. (It) is very popular to say we can change the contract, that is why we’re careful to say that we have to learn from the mistake, and ensure that future contracts do not make the same mistake. And that is what we’ve done; that is what we’re doing.”
In addition to the 2016’s agreement’s industry low royalty – a meagre two per cent – other features such as a lack of ring-fencing provisions, sweeping cost recovery clauses, tax exemptions, among others, continue to attract heavy criticisms. (G3)