Aug 24, 2020
Yesterday, two women approached the publisher of Kaieteur News as he was about to enter his office. They said they could not afford to buy the newspapers everyday but they have been following the reports about the oil agreements. They asked if they could be given a copy of yesterday’s newspaper.
Those concerns of these two women reflect the widespread interest which the oil agreements have generated. It shows that while the ordinary man and woman may not be saying much publicly, they are following keenly what is taking place. And they are looking to see how the new government is going to approach the renegotiation of the oil contracts.
Kaieteur News has been providing a tremendous public service through its exposure of the shortcomings of the present contract, the initial concealment of the signing bonus and the huge field development costs, which ExxonMobil has submitted.
Glenn Lall’s advocacy did not fall on deaf ears. The people of Guyana may be silent, but they are following closely what is taking place.
Bharrat Jagdeo appears to be the government’s point man overseeing the oil industry. He should not be tasked with spearheading any renegotiations. Nor should the renegotiation be left to the government alone. If the country’s interest is to be protected, a broad-based committee should be involved in the review and renegotiation. Simply handing this task to a foreign consultant and asking the government to renegotiate on the basis of this review would amount to a gross dereliction of duty on the part of the government.
The government needs to be assured that, when it comes to renegotiating these agreements, it can count on the support of the overwhelming majority of Guyanese. To do otherwise would subject the government to extreme pressures.
The Americans are not going to stay neutral. The role of US diplomatic personnel – wherever they are stationed – is to represent the interests of Americans and its companies. The United States will use its diplomatic muscle to achieve its objectives.
The Forbes Burnham government attempted to nationalize the American-owned bauxite industry in the 1970s. The United States immediately dispatched a representative to talk to Burnham. By the time, the representative left, Burnham developed cold-sweat. He caved in a few days later. Instead of nationalization, he ended up having to pay reparations to the Americans. For the next twenty years, that compensation contributed to the skyrocketing of Guyana’s external debt.
The United States Embassy is therefore not going to sit idly by and allow the PPP/C to hold American companies hostage to the threat of renegotiation. But with the backing of the entire country, Guyana can resist these pressures and emerge with a decent deal.
But two things will have to happen. First, Jagdeo should not be allowed a major say in this process. He has never proven adept as a negotiator. He made a spectacle of himself during the negotiations of the Economic Partnership Agreement. He tried to play hardball by fighting for the unrealistic goal of reciprocity among unequal partners. In the end, he was forced to drink his own vomit and was humiliatingly forced to sign the very agreement against which he had raged.
His showmanship almost placed Guyana’s exports in jeopardy. He should not be trusted to be the country’s point person in any oil renegotiations but should be part of a broad-based committee, including persons from civil society.
All is far from being lost. Guyana has a trump card in any negotiations. ExxonMobil’s Payara Field Development Plan is awaiting approval from the Government of Guyana. Without this approval, the plan cannot proceed.
This application presents Guyana with a golden opportunity to ensure better terms in the oil agreement. It will not have another bite of the cherry.
The former government squandered its golden opportunity. It shortchanged Guyana when it gave approval for the renewal of the expired permits for the Stabroek Block. Instead of seizing the opportunity to get the best possible deal, the former government signed the worst oil agreement ever.
The result of that is Guyana was expected to gain only 2% royalty and 50% profit sharing (after expenses). It was estimated that Guyana would have earned US$300M this year but a combination of COVID-19 and low production and low oil prices now means that the country will earn far less than it had anticipated.
The ball is now in the PPP/C’s court. A better deal from Payara will ensure that this level of future uncertainty is removed. But that will require a broad-based committee to renegotiate the agreement. And the downgrading of any role assigned to Jagdeo.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)
