Govt will not weaken new PSA to suit ExxonMobil – VP Jagdeo

– insists Guyana must get fair share of oil deals

Vice President Dr Bharrat Jagdeo has made it clear that while his government wants ExxonMobil to succeed in their operations in Guyana, the country must also get a fair share of the bargain and therefore it will not weaken any provisions in the new Production Sharing Agreement (PSA) to suit the oil company.
The United States oil major was among six companies that submitted bids on eight of the 14 blocks offshore Guyana that were up for grabs in the recently concluded auction. However, at a press conference earlier this week, ExxonMobil Guyana President Allistair Routledge said the oil giant will not sign the new model PSA in its current form, citing concerns, specifically, about the timeframe set for the aggressive work programme as well as the time periods for relinquishment.
In fact, Routledge said these concerns were raised during the consultant period on the draft PSA and were even included in its bid document submitted during the auction.
However, Vice President Dr Bharrat Jagdeo on Thursday pointed out that Guyana paid for the best international experts, IHS Markit, to draft the model PSA and was told that the fiscal regimes contained therein are “very competitive globally.”
To this end, Jagdeo declared that the Guyana Government will not weaken any of the new provisions just to suit the US oil giant.
“If ExxonMobil here in Guyana, or in Texas, believes that we must take every one their comments on our draft PSA and accept those comments fully and wholeheartedly then incorporate them in the new PSA, they need to think again… This is a new government, a different dispensation… [and] we’re not going to weaken the new PSA to suit ExxonMobil…”
“Exxon probably got sweetened by the Stabroek Block PSA and therefore, this looks very different. The conditions seem onerous. We don’t believe the conditions are onerous. They were canvased by an international advisor and we’re told that they are not onerous and they would allow for effective management of this sector,” the Vice President stated during a press conference at his party’s Freedom House location.
He outlined, however, that the government is not opposed to making certain minor changes to any oil contract that will be signed but he insisted that there will be no alterations to the new core fiscal terms.
The 2016 oil contract for the Stabroek Block signed between the ExxonMobil-led co-venturers and the then APNU/AFC Coalition Government had been heavily criticised for low royalty, lack of ring-fencing provisions, and cost oil claims that will see Guyana losing billions, among other issues.
For these new potential oil deals stemming from the auction, the PPP/C Administration has crafted a new PSA. Under new conditions, Guyana stands to benefit from as high as US$20 million signature bonus for the deep-water blocks and US$10 million for the shallow-water blocks. Additionally, while it includes the retention of the 50-50 profit-sharing after cost recovery, there is an 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 the previous 75 per cent, among other provisions.
The Vice President argued that Government’s priority is ensuring the country and its people reap as much benefits from any new oil deals.
“Mr Routledge should look at their capacity. We want them to do well in Guyana. We want them to produce the oil. We want them to produce increasing amounts of oil. We want them to make money but we want to ensure the country gets its fair share of the money. We want our oil to be produced in a safe manner, protecting our people. We want Guyanese to benefit from this production through local content…”
“So, if they don’t want to sign [the new PSA]; fine, they don’t need to sign it. We’re not going to just change this PSA and make it the way Exxon wants it. That probably happened in 2016 but it’s not gonna happen now,” Jagdeo maintained.
VP Jagdeo also used the opportunity to respond to the Routledge comments about Guyana’s lack of capacity to handle certain contents in the new PSA.
The ExxonMobil Guyana President told reporters earlier this week that there are a lot of approvals required under the new PSA and he does not think that Guyana’s Ministry of Natural Resources is set up to process, review, and generally exercise those functions.
But the Vice President lashed back, saying that Guyana will deal with building its capacity.
“His comment that we may lack capacity, the way I saw it is that we must weaken the provisions of the Act or the PSA because we don’t have the capacity to ask for all of this information or process all of this information. We just spoke about the building of the capacity and moving to make sure that we properly police these contracts at the operational level.
So, if that’s his thinking that we must weaken the provisions because we don’t have the capacity now, it’s short-term thinking and we don’t subscribe to that at all. We have world-class provisions in the law and the new PSA and we’re building capacity to police them… He shouldn’t worry too much about our capacity to process the data, he should worry about their responsibility to produce the data and submit it to the ministry on time… We’re working on building the capacity,” Jagdeo stated. (G8)