Addendum to oil agreement
While more voices are needed, the yeoman’s work being done by members of civil society in relation to the travesties in the oil and gas sector must be strongly applauded. The most recent example of this was the unearthing by commentator Christopher Ram of a 26th of April 2019 addendum to the abominable June 27th 2016 Production Sharing Agreement (PSA). That addendum made it explicit that the paltry 2% royalty provided for to the State could not be reclaimed from Guyana’s share of profit oil by ExxonMobil and its partners. There are a number of matters that arise from the discovery of this addendum but in passing it would seem that there was a healthy distrust by the Granger administration of its oil partners hence the fortification by way of an addendum that consolidated Guyana’s hold on the 2% royalty.
It is a matter of grave concern that after learning of the existence of the addendum, Mr Ram applied to the Deeds Registry for a copy only to be told that it couldn’t be found. Following the publication of a letter by him in this newspaper of what he had been told, the document miraculously appeared at the Registry and Mr Ram was able to retrieve a copy. At the very least, it would appear that Registry staff are not doing their work efficiently. The head of the Registry and its board should take due note of this matter. It is one that the ordinary citizen and the business community who intend transactions with the Registry should also be perturbed about.
There is also the matter of transparency. The Granger administration and its responsible ministers were notorious for hiding vital agreements from the public. That type of conduct has no place in modern-day governance and while the Granger administration is history the Ali government should take careful notice. While major changes had been made to the 1999 PSA, the Granger administration had adamantly refused to table in Parliament, or release otherwise, the new June 27th 2016 PSA. That wall of resistance crumbled when in his October 30, 2017 oil and gas column in Stabroek News, Mr Ram (again) cited the hitherto unknown inclusion of a Signing Bonus in the 2016 PSA. A document confirming the existence of the signing bonus was then published in Stabroek News on December 8, 2017. In the face of all of this, the government threw in the towel and released the 2016 PSA at a ceremony on December 28, 2017 at the Ministry of the Presidency with the then leading official of ExxonMobil’s subsidiary in attendance.
Yet, despite the damage it accrued to its image by withholding the 2016 PSA and the signing bonus, the Granger administration continued with its opacity in relation to the oil and gas sector with the signing of the April 26th 2019 addendum. It may be that this silence was at the behest of ExxonMobil and its partners as they may not have wanted more discussion about the prospect of renegotiating the 2016 PSA which was already at fever pitch. There was also another possibility. Despite its later court excursions, the Granger administration had fallen to a motion of no confidence on December 21, 2018. It would not have wanted debate about whether it had legitimately executed this 2019 addendum to the contract. That is no plausible ground, however, for withholding this document from the public.
The current PPP/C administration itself did not disclose this document. This was despite the fact that it knew about it, according to its Natural Resources Minister Vickram Bharrat in a statement on September 18, 2022. This addendum does pose a legal dilemma to the PPP/C. It has said that no agreement concluded by the Granger administration following the 2018 motion of no confidence will be recognised. Does the PPP/C government recognise the addendum as validly concluded? What does it say about ExxonMobil that it was prepared to conclude a ground-breaking addendum with a weakened APNU+AFC administration which had fallen in a no-confidence vote just months earlier?
The most significant matter raised by the hidden addendum is that it clearly establishes two things: the 2016 PSA can be amended and that there are circumstances under which ExxonMobil and its partners can be brought back to the negotiating table. The document is styled as an addendum but within its body it is further described as a deed of agreement. While contract experts will have authoritative opinions on the quality of change engendered by this addendum it does seem that it amended a document that was previously considered complete, fully agreed upon by all parties and executed in its original form. This must therefore open the door to the raft of changes to the PSA that the public and civil society have been demanding for years.
In his statement of September 18, Minister Bharrat rashly said “…The recent reports in the media present that the 2019 amendment to the PSA sets the precedent for the renegotiation of the entire contract between Guyana and ExxonMobil. The government reiterates that the contract will remain fiscally unchanged for the country and investors’ benefits”. He then added that the government was of the view that “if specific fiscal considerations are amended in the current PSA, then that could impose unfavourable effects on current and future investments in Guyana, given the current world petroleum economy,”
These statements may have more to do with the government’s traditional stance of protecting this agreement rather than relying on the considered opinion of contract experts. The more that is revealed about this unjust PSA the more it appears that there is no separation between the PPP/C and APNU+AFC in allying themselves with ExxonMobil against the interest of the country and its people. At the very least, the addendum creates a precedent for more addenda that could clarify other concerning areas such as insurance coverage and protection of the environment. That Minister Bharrat and his government have not even acknowledged this opening shows that they are not fit and proper for the administration of the oil and gas sector. At best the addendum sets the framework for deeper changes to the PSA including the varying of the 2% royalty and properly defining cost oil and the period for its reclamation. The government should now operate as if the best case scenario applies. Consideration of ExxonMobil’s fifth proposed platform, Uaru+ should lead to the government inviting the oil company and its partners to consider that as the production volume rises Guyana is entitled to a higher royalty. Let’s see how badly Exxon and its partners need this fifth oil-producing platform. The flow of oil revenues must not make the Ali administration any more complacent than already evident.