US$18M bonus was paid for 10-yr extension

– according to Exxon’s country manager

In the wake of the Government finally releasing the contract it renegotiated with ExxonMobil, the oil giant has clarified that the US$18 million bonus it paid to the Government was meant to secure a 10-year extension of the renegotiated contract.

ExxonMobil Country Manager Rod Henson made this assertion when addressing the media at a press conference on the same day that the contract was released.
“The bonus was agreed to, not to gain access to the Stabroek Block, because we had that, but it was to gain this extension,” he told the gathering, which included President David Granger and other cabinet ministers and members of civil society.
The bonus first 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, had requested that a foreign currency account be opened at the Bank of Guyana 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.”
Amidst criticism, Government officials have defended the secrecy by saying the money would be used to pay legal fees in defence of Guyana’s sovereignty, should its case with Venezuela reach the International Court of Justice (ICJ).

Fair deal
At a separate press conference later on Thursday, Henson was asked whether the contract was a fair one. He defended the generous terms of the contract while assuring the country it would not take advantage of these terms.
The official emphasized that the agreement was a globally competitive one, and warned against setting expectations for Guyana too high; that is, comparing what the country gets to what other, more mature oil producing countries receive.
“Absolutely! …it’s a fair deal. I think we’ve been treated fairly, and I think we have treated Guyana fairly. Yes, we had discovered the Liza Field. But we have not fully appraised (it). That was only one field, without proven production. And yes, we have the Skipjack dry hole, in addition to other companies that had unsuccessful exploration attempts.
“So I think it’s unreasonable to compare this agreement with other, more mature oil producers like Brazil or countries in West Africa, Canada or the United States. It’s even more so (unreasonable) to cherry pick single elements of the agreement and do so.”
Henson noted that it is a common feature in the oil industry to incentivize its oil sector to encourage investment as well as to transfer revenue potential from taxes to profit-sharing. He also urged observers to look at the entirety of the agreement and the conditions at the time it was negotiated. He noted that the 2016 agreement was based on a 2012 model, in turn based on a 1999 contract.
“The 2016 agreement that is being released today is based on the 2012 model agreement the Government had. It’s basically the same agreement with limited (changes). It secured a range of additional benefits for Guyana, for work commitments, training, local content, and increased fees and payments.
“If we assume IMF’s crude price forecast, which starts at US$50 a barrel, and we assume the production forecast we have for Liza phase 1, Guyana can have between $1.5billion and $2 billion over the first five years of the project. And over the life of Liza Phase 1 only, Guyana can receive over US$7 billion,” he said.