Kaieteur News – Leader of the Alliance For Change (AFC) and former Minister of Public Security, Mr. Khemraj Ramjattan, has said that the former Coalition administration, of which his party was a part, had inked the contract with oil giant ExxonMobil back in 2016 because the country was in desperate need for money.

Leader of the AFC, Khemraj Ramjattan

Explaining that other sectors, particularly the agriculture and mining, were not performing well at the time, he said that the then administration entered into the Production Sharing Agreement (PSA) or contract with Exxon, seeking to ensure that Guyana did not sink into a financial crisis.

The AFC leader gave this explanation during an exclusive interview with this newspaper on Saturday, where he also used the opportunity to call on the government of the day to ensure better provisions are included in any new PSA to be signed for the other oil blocks.

He said, “We needed money; sugar wasn’t making money, rice barely making any, gold barely making some, we needed (resources)… As politicians, you got to understand the calculus in decision-making and a lot of people just don’t get it.

You don’t sign up the agreement and they would’ve cuss yuh…but we needed money because sugar had to be downsized, it was just sucking up the treasury, taking a billion dollars a month.”

The party leader believes that the oil revenue has come in handy, as an additional revenue stream to help the country.

However, Ramjattan noted that the Government of Guyana should be preparing to ensure that oil companies pay their own taxes in any new PSA, as well as include other key provisions, since it has made it clear that it will not be pushing for a renegotiation of the 2016 deal.

This is particularly important he said as the oil giant is gearing to start exploration activities in two other oil blocks soon, namely Kaieteur and Canje. The AFC Leader believes that preparations should also be undergoing to ensure more royalty is paid to the country and ring-fencing is included to safeguard the country’s revenue.

According to Ramjattan, “That tax payment, I would want us to get better with that. We need to tighten up that…the taxation provisions can be better now because the area has been derisked and I believe that that is one of the area that we should very much argue for in the negotiations for the new blocks that they are about to start exploring.”

When asked to say specifically if he believes that the oil company should pay its own taxes in any new agreement, the Leader agreed and added, “Ring-fencing provisions should be included but it will all depend on whether Exxon agrees to these things because we might agree to 50 percent royalty, we might demand a maximum taxation but that does not mean that Exxon will agree.”

Vice President Bharrat Jagdeo has repeatedly said during press conferences that the People’s Progressive Party/Civic (PPP/C) government will not renegotiate the 2016 oil contract that was signed for the Stabroek Block, where approximately 11 billion barrels of oil has been discovered to date, as it believes in sanctity of contracts. While in opposition, the PPP had promised to renegotiate the deal but changed its mind upon assuming leadership of the country in August 2020.

Instead, Jagdeo has indicated that the government will be seeking better terms in any new agreements. Back in February, this publication reported that the VP had pointed that a model PSA will address issues such as higher royalty rates, the need for ringfencing provisions, as well as those related to taxes.

Speaking with members of the media at the Arthur Chung Conference Centre (ACCC), the Vice President said, “CGX Energy Inc. has found oil and there may be now increased pressure because if they move swiftly to production then we will have to get a model PSA in place.”

The former Head of State said work on the PSA was put on the back burner since ExxonMobil was the lone explorer marking all the commercial discoveries in the Stabroek Block.

The Vice President said, “So there is urgency now to move to a model PSA that would correct many of the things we find are wrong with the last one that was signed with Exxon (the Stabroek Block PSA). And all new entrants would have to subscribe to the new conditions.

I don’t want to get into too many details but issues raised such as high royalty rate, and ring-fencing, those have to be looked at; tax treatment and a whole range of other issues have to be looked at.”

He added, “There are about 10 or 11 areas we identified to look at and they have to do with the fiscal terms.”

He alluded, nonetheless, that when the time arrives, the government would be ready to engage with CGX and its partner, Frontera.

Currently, the lone oil producer in the country – ExxonMobil – is seeking to start exploration and drilling activities in the Kaieteur and Canje Blocks. Applications for the activities have been submitted to the Environmental Protection Agency (EPA) for approval.

For the Canje 12-well drilling campaign, Exxon is hoping to commence its operations in the fourth quarter of this year and wrap up in the first quarter of 2025. As regard the Kaieteur 12-well campaign, the oil company said that this exercise, once approved, would start in 2022 or 2023 and conclude by the first quarter 2027.