– says comparing contract with 2016 PSA is desperate
In the wake of the release of the 2013 oil contract between Government and CGX Resources Incorporated, comparisons were made between that contract and the Exxon agreement. However, the Attorney General at the time of the signing of the CGX contract has raised a staunch defence of the agreement.
Opposition PPP/C Member of Parliament Anil Nandlall
According to former Attorney General and Minister of Legal Affairs Anil Nandlall, the CGX contract was signed in circumstances that are starkly different from when the coalition Government signed its controversial contract with Exxon. In a statement, he called it desperate to even compare the two documents.
“The attempt by the Government at comparing the 2016 Petroleum Agreement which it entered into with ExxonMobil with similar agreements entered into by the PPP/Civic Administration is nothing but a desperate, pathetic and asinine attempt at damage control,” Nandlall said. “It is the most incompetent attempt at mitigating one of the most lopsided contracts perhaps ever negotiated,” he declared.
“At the time when the PPP/Civic Government negotiated these contracts, the realities were radically and fundamentally different. There was no conclusive evidence that we had oil in commercial quantities, moreover and certainly, in the quantities numbering billions of barrels. Additionally, when some of those contracts were signed, our border controversy with Suriname was not yet resolved,” he advanced.
Nandlall pointed out that when the ExxonMobil agreement was negotiated in 2016, there was confirmation of an estimated three-billion-barrel oil reserve in the Stabroek Block’s Liza project.
In May of the preceding year, Exxon had confirmed that more than 295 feet of high-quality, oil-bearing sandstone reservoirs had been encountered at its Liza 1 well. Discoveries have since been made at the Payara, Snoek and Liza Deep wells.
CGX, whose entire portfolio is focused on Guyana, has meanwhile not yielded the success of Exxon, with three dry holes being drilled in 2005.
“For this Government to even think that sensible Guyanese will gobble up this clumsy propaganda is not only a crass insult to our collective intelligence, but it demonstrates how extraordinarily naive the Government is,” Nandlall noted.
The contract
Government on Saturday released the contract with CGX. In a statement that accompanied the news that the contract was released, the Natural Resources Ministry promised that “over the coming weeks and months, as all aspects for the release are worked out with the operators, the remaining Agreements will be released in similar fashion.”
Under Article 11, ‘Cost Recovery and Production sharing’ heading of the contract which was signed on February 12th, 2013, the then Government has agreed to accept a one per cent royalty in addition to a 53 per cent share of profit oil and gas, after recoverable costs have been satisfactorily negotiated. This is provided that the company moves from exploration to production.
The contract states: “All recoverable contract costs incurred by the contractor shall, subject to the terms and conditions of any agreement relating to non-associated gas… be recovered from the value… of a volume of crude oil or natural gas produced from the contract area, and limited in any month to an amount which equals 75 per cent of the total production from the contract area for such month…”
This is a greater share than the 50 per cent share the coalition Government would come to negotiate with ExxonMobil three years later. The one per cent royalty was, in fact, contained in the original 1999 Exxon agreement, until it was increased by one per cent by the coalition in 2016.
Oil companies — in this case CGX — are expected to use revenue from their production in order to recoup their capital investment. This will be categorized as “cost oil”. Whatever remains of this is the ‘profit oil,’ which Guyana would have to split with the oil company and its associates, if there are any.
When it comes to relinquishment, Article Five of the contract states: “If, prior to the end of the initial period of the Petroleum Prospecting Licence issued to the contractor under Article 3.1, an application is made by the contractor for renewal of the Licence under section 24 (1) of the Act, the contractor shall relinquish at the end of the initial period an area equal to at least 15 per cent of the original contract area…”
It goes on to say: “If, prior to the end of the first renewal period… an application is made by the contractor for a second renewal of the licence, under section 24 (1) of the Act, the contractor shall then relinquish at the end of the first renewal period an area equal to at least 25 per cent of the original contract area…”
This was invoked last year when the Canadian company gave up 25 per cent of its concessions after renegotiating its work commitments. As a consequence, its blocks in the Corentyne and in Demerara have reverted to the state.
