Granger’s 1-year extension to Exxon: “We’re living with consequences of their extension” – VP Jagdeo

…questions urgency of extension at the time

Vice President Dr Bharrat Jagdeo has stated that Guyana is now facing the consequences of the decision of former President David Granger, who granted a one-year extension to ExxonMobil on its 2016 prospecting licences – a move which has shifted the United States oil major’s relinquishment timeline.
The current People’s Progressive Party/Civic Government has been on the receiving end of criticisms and condemnation for the one-year extension given to the oil company, but earlier this week, it was revealed that it was in fact President Granger who had sanctioned the extension for oil exploration just before leaving office in 2020. The extension was requested under force majeure due to the impact of the COVID-19 pandemic on Exxon’s oil operations offshore Guyana.

During a press conference on Thursday, VP Jagdeo questioned the urgency behind this decision, which was made almost five months into the country’s political turmoil following the controversial March 2, 2020 General and Regional Elections, and just eight days before President Dr Irfaan Ali was sworn into office. He pointed out that the one-year extension would only affect the prospecting licence when the second renewal period comes up, when the oil company would have to relinquish 20 per cent of the block – a process that was not for another three years from that time.
“So, there was no urgency, it could’ve been done later. There was no immediacy in the issue, yet he [Granger] did it. His biggest priority when this country was struggling to maintain its democratic credentials and its future… this was his priority. But the fact remains that the APNU/AFC Government gave an extension for one year,” Jagdeo stated.
Earlier this week, the Government released at least three letters written by former President Granger and addressed to ExxonMobil Guyana President Alistair Routledge. In the letters, dated July 24, 2020, the former Head of State approved extensions for Exxon’s holdings in the Stabroek, Canje, and Kaieteur blocks.
“In further recognition of EEPGL’s indications regarding section 43 of the Petroleum (Exploration and Production) Act 1986 and the Stabroek Petroleum Agreement 2016, represented by the Minister responsible for petroleum, has determined to offer relief in respect of the Covid-19 pandemic in accordance with the following parameters (Covid-19 relief) pursuant to section 43 (3) of the Petroleum (Exploration and Production) Act,” the three letters state.

Those parameters include providing the company with an extension by waiving the period of March 11 2020 to March 10, 2021, which Granger said in the letters would not be counted in the overall life span of the prospecting licences. The letters add that this timeline would be reviewed quarterly. However, despite that decision made by the Coalition Administration, there has been condemnation coming from both the APNU and AFC Opposition parties over the matter, including allegations that the PPP/C has granted a second extension to Exxon.
But Jagdeo explained on Thursday because of the Granger-sanctioned extension, the timeline for provisions of the prospecting licences has been shifted one year forward. This means that after the first renewal period in 2019, the US oil giant’s licence was scheduled to undergo a second renewal, which included a 20-percent relinquishment of its block this year. This process, however, has now been protracted to 2024.
“The PPP did not give an additional one-year extension… The second renewal period was shifted to 2024. So, they saw the second renewal period was shifted to 2024, so they think it’s a different extension. They don’t understand that it is the extension [Exxon] got in 2020 from Granger that had this consequence…
“They don’t even understand what they did… The PPP did not give an extension beyond what Granger did… It’s the Granger extension that caused the 20% relinquishment to shift from 2023 to 2024. It’s as simple as that. There is no second extension… We’re living with the consequences of their extension,” the Vice President contended.
According to Jagdeo, ExxonMobil submitted a full report to the Natural Resources Ministry in which they demonstrated how their operational plan/work programme was affected by the COVID-19 pandemic. For instance, they were unable to mobilise two rigs, thus downsizing their operations from six to four rigs. Moreover, activities on one of the four rigs had to be discontinued.
Force Majeure is a French legal term meaning the occurrence of circumstances beyond control that prevent the fulfillment of a contract.
ExxonMobil and its co-venture partners in the Stabroek Block, where oil production has been ongoing since December 2019, will have until next year to relinquish 20 per cent of the oil-rich block, since the one-year extension to explore for oil was granted in an effort to make up for the force majeure that was applied during COVID-19 that resulted in lost time.
The relinquishment clause is typically included in contracts so that companies can relinquish a portion of the block when the renewable period is up, thereby allowing other companies to buy into the respective blocks.
For the Stabroek and Canje Blocks, operators are required to relinquish 20 per cent of their blocks after the first renewal period; while those of the Demerara and Corentyne Blocks are expected to relinquish 15 per cent within this period.
Relinquishment is of particular importance, since the People’s Progressive Party/Civic (PPP/C) Government is currently auctioning 14 oil blocks offshore Guyana. Only recently, the deadline for companies to submit their bids for the oil blocks was extended to September 12, 2023, a decision the Government attributed to ongoing efforts to improve the sector’s regulatory framework. (G-8)