All future Exxon projects must adhere to new PSA terms

…Norton backs AFC, others on issue

Nov 07, 2022 News --- Source --- https://www.kaieteurnewsonline...re-to-new-psa-terms/

Kaieteur News – As American oil giant, ExxonMobil continues to reap exponential profits from Guyana’s lucrative Stabroek Block and the lopsided contract it signed with Government in 2016, stakeholders are beginning to challenge the terms the country got and are demanding more wealth from all future projects to be approved by the Government.

Opposition Leader, Aubrey Norton

Leader of the Opposition for instance yesterday in an invited comment told this publication that all addition projects Exxon wants to pursue in the Stabroek Block, must adhere to the new terms announced by Government to rake in more wealth for the country.

He explained that when the contract was signed by the Coalition Administration six years ago, the company was operating in an ‘uncertain’ environment where the possibility of discovering large deposits of oil was a mere hope. However, since more than 11 billion barrels of oil resource have been found in that Block alone, Norton argued that the environment has changed, meaning that Exxon should now match the royalty and tax rates Government wants from the other oil blocks.

“While I have stressed previously that I wouldn’t use the concept renegotiation, I have consistently argued that the existing Exxon contract has a mechanism in which the Government can engage Exxon and get better terms,” Norton said. He continued to explain that not only should new companies entering Guyana be required to adhere to the new PSA but the American oil giant as well.

Given that the company is still seeking approval for its fifth project, the Opposition Leader believes this is the perfect opportunity for the country to demand more on its resources.

In fact he argued that the Vice President has used the terms of the new PSA as a “smokescreen” to avoid pressuring Exxon into giving Guyanese more wealth from the Stabroek Block.

Norton was also keen to note that the Government’s excuse that changing the deal could hinder potential investment in the sector is unjustifiable since several countries around the World have moved in this direction.

He explained, “The United States Government for example is seeking better deals from these multinational corporations. If a big country like the United States can be seeking better deals, what’s wrong with a small country like Guyana doing the same?”

The Opposition Leader went on to point out, “We are thankful that Exxon invested. In the circumstance which the contract was negotiated, it is understandable, we now have a clear idea of our potential and in this new context, we should seek to get more out of the projects to be approved.”

Norton believes that while the operator should be allowed to recoup its investment and make a profit, Guyanese at the same time must get more out of its resources.

On the note of getting more resources however, he said the country also need clear mechanisms which outline that benefits from the sector must directly reach Guyanese.

“It’s not only about getting the resources but ensuring that the people of Guyana benefits from it,” he said, adding that to ensure this happens, the PPP must vacate office. The Leader of the Opposition pointed to the importance of the wealth reaching Guyanese as poverty levels remain high in the country.

According to Norton, “You need a Government that cares about the people. You can’t use this Government that is focused on getting family and friends rich so we need a change in this regard. This Government has shown that it’s not going to deliver to the people of Guyana. It’s going to deliver to a little clique that enjoys itself while the people of Guyana punish. You only have to look and see how they handle wage increases.”

On Thursday, Vice President Bharrat Jagdeo announced the terms that will be included in a new Production Sharing Agreement (PSA) that will be signed with the operators of 14 blocks to be auctioned soon in Guyana’s territorial waters. Some of the key provisions that will be featured in the new deal include a 10 percent royalty, 10 percent corporation tax and ring-fencing provision.

In making the announcement, the VP also clarified that the 14 blocks range from about 1000 square kilometres to 3000 square kilometres, with the majority of them being close to 2000 square kilometers.

Meanwhile, the Stabroek Block that covers approximately 26,800 square kilometres and is operated by Exxon and its partners- Hess and CNOOC- remains bound to a separate arrangement in which it pays a mere two percent royalty, no taxes and also recovers expenses from multiple projects from the revenue earned by development, in the absence of ring-fencing provisions. It must also be noted that Exxon is allowed to deduct 75 percent of costs from Guyana’s earnings upfront to cover its expenses while the new PSA would cap cost recovery at 65 percent of earnings annually.

The AFC has already stated its position on the matter, insisting that the Stabroek Block should be subjected to the same PSA to allow for a level playing field.