Government has made a commitment to have all contracts signed with all companies undertaking oil exploration activities in Guyana released by the end of this month. The contract with ExxonMobil has already been released.
This announcement was made by Natural Resources Minister Raphael Trotman when addressing a media conference on Thursday in the boardroom of the Ministry of Natural Resources (MNRE).
“We remain committed to releasing all contracts in the natural resources sector,”
A page from the ExxonMobil contract
he said, noting that correspondence has been sent to these companies about this plan. “…the responses received so far have been that there is no objection to the release,” the Minister explained.
Trotman says that by releasing the other oil contracts, Guyanese will have a better understanding of what is taking place within the sector. These contracts are expected to be posted on the MNRE’s website.
“We have started with petroleum — and for the record, let me just say we are not stopping at petroleum; but because petroleum seems to be, (and in fact is), the most important topic on everyone’s mind — we thought we’d start there and then we will work our way around all. It’s a process, but we have started,” he declared.
The Minister has dismissed recent criticisms about the Exxon contract. He noted that concessions in the Production Sharing Agreement (PSA) follow industry best practices and norms.
“I challenge anyone to check any part of the world where there are contracts of this nature… Countries invariably offer concessions to companies to come to their countries; it is done for bauxite (and) it is done for gold,” he explained.
The Minister noted that there are various risks involved when a company invests in a country that is new to a resource — in this case, Guyana and its oil. “You give concessions for imports…it was done for all of the other oil companies. It is part of the Petroleum Exploration and Production Act; section 51 allows for these favours,” he explained. Last year, Government released the Production Sharing Agreement between itself and ExxonMobil after pressure was mounted for it to be released, so that it could be properly scrutinized. Upon the contract’s release, it was recognised that there is contained therein clauses for the company to put aside millions for Local Content, but is also granted sweeping tax concessions.
That contract was signed in June 2017 between the coalition Government and ExxonMobil and its partners in the Stabroek block. In Article 15 of the contract, Exxon is exempted from paying Corporation, Excise or Value Added Tax (VAT) on its earnings from petroleum.
Article 15.4 also provides for the Government itself to pay the company’s income tax. To facilitate this, the oil company has to submit tax returns to the Government.
That’s not all. Article 32 stipulates that Government cannot modify the contract or increase any fiscal obligation the company has. This therefore puts a cap on the taxes, royalties, duties, fees or charges outlined in the contract.
Government also has to compensate the operator if a change to existing laws causes loss of revenue for the company.
But there are provisions for Exxon to fulfil its corporate social responsibility. These include setting up a fund for social and environmental projects to which Exxon has to contribute US$300,000 per year. The sums roll over, and the company, together with Government, will determine which projects to fund.
The contract sets aside another US$300,000 per year to ensure Guyanese personnel are trained at local and foreign universities and conferences. There are also provisions for a continuous review of Local Content.
Guyana’s high-risk status has been changed since ExxonMobil’s 2015 oil find in the Stabroek Block — and before the renegotiated contract. In May of that year, Exxon confirmed that more than 295 feet of high-quality oil-bearing sandstone reservoirs had been encountered at its Liza 1 exploration well.
In late June 2016, Exxon’s drilling results at Liza 2 revealed more than 58 metres of oil-bearing sandstone reservoirs in Upper Cretaceous formations. The well was drilled to a depth of 5,475 metres at 1,692 metres water depth. Drilling results confirmed recoverable resources to be between 800 million and 1.4 billion barrels of oil equivalent.
