Govt sacrificed long-term gains for short-term benefits – Jagdeo

Oil contract

With less than one week after the contract between Guyana and US oil giant ExxonMobil was released to the general public, Opposition Leader Bharrat Jagdeo is still disturbed that the Guyana Government did not negotiate a better deal for the country and allowed the company to gain many tax breaks.
Addressing his first press conference for the year, Jagdeo told the media on Tuesday that he feels Government had a perfect opportunity to negotiate a better deal for Guyana but failed to do so, on many counts. He said, “I look around, and people don’t seem to care and it bothers me a lot because what we have given up might be billions of dollars into the future to get a few million dollars here.”

The Opposition Leader said ExxonMobil gained more in four clauses regarding the extension of the agreement, stability clause on taxes, relinquishment requirement and the regulation of the gas sector.
“The paltry US$3 million we got from Exxon over the next 10 years. And I am calculating the US$3 million assuming US$18 million bonus divided by 10 years that’s US$1.8 million and then they got more for training, and rental feel…So US$3 million more per year. When you compare the two, you will see what we have given up.”
Jagdeo claimed that he is depressed thinking about this. “I feel sad without knowing why and then I think about it. Frankly speaking, when you work so hard to move a country from where it was… to where we are today… and just when we have the possibility of turning the corner, to have a Government come in and squander because of incompetence, a future that we could have by making bad agreements.”

Difficult task
Asked whether he would consider having the contract renegotiated if the People’s Progressive Party (PPP) is returned to Government in 2020, Jagdeo hinted that this may be a difficult task to undertake. In fact, the Opposition Leader said once a Government participates in negotiations then those contracts should be respected, even though they might be unhappy with certain aspects of it.
“We are very unhappy about many of the contracts, the Barama contract, the Guyana Telephone and Telegraph Company contract that we inherited when we took office but we had to live with those,” he said. As a political party, Jagdeo said the PPP would not like to send the wrong message to foreign investors. “We have been one of the most successful Governments ever in our history to attract foreign investment. In fact, most of the foreign investments that the country is benefiting from now came from the PPP.”
The PPP General Secretary referred to another contentious issue which required tough negotiation with Guyana Gold Fields which resulted in a more reasonable outcome. “I argued that royalties should go to eight per cent for large mining companies if the price of gold is over $1000. And they didn’t want to sign the contract and it went back and forth. But we managed to get them to agree to something good.”
Jagdeo made it clear that although Guyana was holding all the cards when it sat down to negotiate with ExxonMobil, the end product is a contract heavily favouring the oil company.
According to Jagdeo, the negotiating power had shifted in Guyana’s favour by 2016 having discovered oil and as such, a much more favourable contract for the country could have been garnered. With such advantage in hand, he added that Government failed in its negotiation with the oil giant, questioning the motive of the negotiating team when it agreed to the terms of new contract.
The contract was released on Thursday last, after incessant public pressure. While it contains provisions for local content, there are a number of concessions. For instance, Article 15 of the contract states that Exxon is exempt from paying Corporation, Excise or Value Added Tax 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.