‘No prospect’ at this time of Exxon contract review – President.
Despite noting that there is “no prospect” at this time for a review of the controversial Production Sharing Agreement (PSA) between the government and a subsidiary of oil giant, ExxonMobil, President David Granger said yesterday that the matter is engaging the attention of Cabinet
“These matters are before Cabinet and it depends on what determination Cabinet arrives at but the contract is an agreement between two parties and these things have to be approached very carefully. There is no prospect at the present time that it is the intention of Cabinet to review it but as I said it is before Cabinet”, he told reporters shortly after swearing in Senior Counsel (SC) Rafiq Khan as a temporary appellate judge.
Granger was asked whether government is prepared to review the contract.
Since the PSA was released late last year, government has faced mounting criticism particularly over the US$18M signature bonus it received and the 2% royalty and members of civil society have called for a review of the contract.
Aside from the signature bonus, the modified contract includes a US$760,000 increase per year in rental fees, from US$240,000 to US$1M, training funding increased from US$45,000 to US$300,000 per annum and a new allocation of US$300,000 for social and environmental programmes has been made. Government also boasted that it was able to introduce a two percent royalty on gross production.
For ExxonMobil, a ten-year agreement which was scheduled to be up in 2018 was extended and the tax regime remains the same as in 1999 where it would not pay VAT, excise tax or duties on its operations.
The company can also export all petroleum to which it is entitled free of any duty, tax or other financial impost and can receive and retain abroad all proceeds from the sale of such petroleum among many other benefits.
An IMF team in a November 2017 report had said that ExxonMobil got a generous agreement from Guyana and that loopholes exist in the agreement which could see the country losing out on revenue.
Minister of Natural Resources Raphael Trotman had defended the agreement saying that the positives must be looked at and that government is pleased that it has secured a deal with a large and reputable company that has anchored interests and will not abandon this country while simultaneously generating needed revenue.
“It is important that we surround ourselves with one major company and then develop other relationships. But it is important that we don’t try to play the field as some bachelors try to do. We should have a civil relationship with one, anchor ourselves with one, develop our relationships with one and if others come we will be able to better get better terms than with Exxon. It is difficult to put a dollar value to the value of Exxon. No other company has been able to say they will stay here. So we are satisfied despite what the critics may say,” he had said on December 29 last year. He also used the occasion to distance himself from the negotiating of the 2016 ExxonMobil contract saying it was a team of professionals that conducted the discussions and even in hindsight his government is satisfied with the terms reached.
Trotman explained that other companies preparing to explore here must prepare for intense negotiating as “what Exxon enjoys others are not going to enjoy” and even Exxon if they wished to start exploration at another block will see different terms and conditions. “If Exxon wishes to have a contract for another block it will be different,” he had added.
The PSA was signed in 2016 with Exxon’s subsidiary, EEPGL. The original PSA was signed in 1999.
Prior to government revealing the contract, a letter confirming that government did receive the signing bonus was leaked to the media. Correspondence dated September 20, 2016 from the Ministry of Finance to the Bank of Guyana spoke to arrangements for the transfer of the signing bonus. The letter did not specify the quantum of the bonus.
Former Auditor General Anand Goolsarran has said that the money should be returned to ExxonMobil as it cannot be considered as legitimate.