…as Brazil pockets US$700M oil signing bonus from Exxon
Even as controversy swirls over the Government’s secretive collection of a US$18 million signing bonus, questions are now being raised over exactly what negotiations took place. This is so as Guyana’s bonus pales in comparison to a US$700 million signing bonus Exxon paid to Brazil.
Former Alliance For Change (AFC) Chairman, Nigel Hughes, noted that Finance
Former AFC Executive Nigel Hughes
Minister Winston Jordan himself had declared that Guyana was de-risked following significant oil finds.
Despite Guyana having the upper hand, however, Hughes noted, it accepted a 2 per cent royalty and now a US$18 million bonus. As such, he questioned the basis upon which the negotiations were conducted. This is even as Government has consistently declared it was working with the best experts.
“One year after general elections, the newly elected representatives of our dear Republic determined that they were possessed of the requisite skills all on their own to enter into negations with the biggest oil company on the planet about the terms of the agreement which were previously agreed,” Hughes stated in an analysis of the situation.
“How is it possible that we all on our own end up voluntarily accepting a US$18
Natural Resources Minister Raphael Trotman
million bonus and two per cent royalty on a 2.4 billion-barrel field, when we knew the industry experts were saying we were potentially sitting on a 10 billion-barrel field?
“Note that this was after the news of the size of Liza was already in excess of 1.4 billion barrels and counting,” he said.
Zeroing in on the negotiations, Hughes questioned whether Government’s team had a Best Alternative to a Negotiated Agreement (BATNA) before it went into the negotiations. A BATNA, which increases negotiation power by presenting options, is a common feature put forward by negotiating theory.
“Did anyone bother to conduct the most rudimentary of checks to ascertain what were the underlying principles when assessing signing bonus, especially after you have a find the size of Liza, with the promise it then held?” Hughes also questioned.
“Did we collectively bother to find out whether 2% royalty was remotely close to what was acceptable in the industry in 2016? And even US$18 million? For Guyana, this is not a significant sum for the capital assets of some private sector giants, so what was the basis on which these negotiations were conducted? Did we have a “Best Alternative to a Negotiated Agreement (BATNA) when we embarked upon these negotiations?” he asked.
While he acknowledged the importance of disclosure, accountability and transparency, he noted that the real issues are who negotiated this settlement, and what systems are in place to stop a repeat? Hughes made it clear that Guyana has drawn a “bad card.”
Record-breaking
In what industry experts term record- breaking sums, Brazil was able to attract over US$1.1billion in bonuses at a Petrobras auction in September. An ExxonMobil consortium came in with the largest offer, at $700 million for a Campos Basin block.
Guyana, which had a longstanding agreement with ExxonMobil, renegotiated that agreement after the company’s 2015 oil find in the Stabroek block. 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.
Included in the new agreement was a 2 per cent royalty rate; an increase of 1 per cent. But Government has repeatedly pleaded ignorance to reports that it received a US$20 million signing bonus from Exxon. These reports gained traction after they were exposed by Chartered Accountant Christopher Ram.
Evidence of the shady transaction came to light in a leaked correspondence dated September 20, 2016 and addressed to the Governor of the Bank of Guyana with this subject: “Signing bonus granted by ExxonMobil – Request to open bank account”.
It shows that Finance Secretary at the Finance Ministry, Hector Butts, has requested that a foreign currency account be opened at the Bank in order to receive a deposit in the form of a ‘signing bonus’ to be given by ExxonMobil.
The letter stated, “This account should not be treated as part of the Bank’s reserves. Instead, the proceeds should be held in the currency of the deposit, that is, United States dollars, and invested in secured interest-bearing securities.”
The missive also listed the signatories to the account: Hector Butts, Finance Secretary at the Finance Ministry; Louise Bouyea, Deputy Finance Secretary at the Finance Ministry; Jawahar Persaud, Accountant General (Acting) at the Finance Ministry; and Jennifer Chapman, Deputy Accountant General at the Finance Ministry. The letter was also copied to Natural Resources Minister Raphael Trotman.
Condemnation has already flowed in from the Transparency Institute of Guyana Inc (TIGI) and from Christopher Ram himself. The Government has been slammed for being given opportunity, but refusing, to come clean on several occasions.
After the fact, Natural Resources Minister Raphael Trotman defended the secrecy by saying the money would be used to defend Guyana’s sovereignty in the legal process.
Minister Jordan defended his role in the arrangement by noting that he was not obligated to answer questions he was not asked.
