Monthly Archives: July, 2024

Editor, The Bahamian Minister of Education deserves recognition for her recent efforts to improve the educational landscape. Initiatives like the introduction of new programs and,...

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By Luz Mely Reyes (Efecto Cucuyo) HAVANA TIMES – The Carter Center declared that the presidential elections held in Venezuela on July 28 cannot be...

Jagdeo refuses to address ExxonM’s interest rates on investments Jul 31, 2024 News Vice President, Dr. Bharrat Jagdeo – as citizens remain in the dark since oil operation began Kaieteur News – As more oil projects being approved by the Guyana Government the issue of the interest rates being charged by the operator of the Stabroek Block, ExxonMobil Guyana Limited (EMGL) continue to concern Guyanese. However, Vice President and chief policymaker of the sector Bharrat Jagdeo has dismissed these concerns. It must be noted that several countries including neighbouring country, Suriname do not allow oil companies to charge interest rates on their investments. Previously, VP Jagdeo said Guyana was paying a rate to Exxon as this is a standard practice for a return to be generated on a company’s equity. “Regardless of whether you make the financing in the form of a loan or equity, you have to get a rate return. There is a cost of capital and that is how it is,” Jagdeo asserted. Despite multiple attempts by this newspaper to clear the air on this issue however, the government has refused to tell the nation how much interest was being charged on the companies’ investments. ExxonMobil and its partners, Hess and CNOOC each make annual equity contributions to support the Stabroek Block operations. Consequently, the companies each receive an interest on the financial investments. This rate of return, though justified by Jagdeo remains a mystery, although this country’s resources are being used to pay those companies. His most recent approach to questions on these matters is to tell a reporter  from this publication at his weekly press conference at Freedom House on Robb Street, that the capping of the interest rates is “an old question” he has “dealt with a million times” before.  The VP was asked by this publication is “Sir, When do you plan to join the rest of the oil producing world in capping Interest rates charged by the oil companies?” He said, “I am not dealing with that. That was dealt with one million times before. That is an old question that has been dealt with a million times.” Despite his claim of dealing with the issue a million times, the interest rate seems to be kept under lock and key with strict security details as the public is yet to know the financial burden they are saddled with for years to come.  ExxonMobil is free to recover the interest, expenses and fees incurred on loans for the development of the resources in the Stabroek Block, without consent from the Minister responsible for Petroleum. This is outlined in the 2016 Production Sharing Agreement (PSA) Guyana signed with ExxonMobil and Co-Venturers, Hess and CNOOC.  Annex ‘C’ of the Agreement, specifically in Section 3.1, which governs costs that can be approved without the Minister’s approval states: “…interest, expenses, related fees incurred on loans raised by the Parties comprising the Contractor for Petroleum Operations and other financing costs provided that such expenses, fees and costs are consistent with market rates.” The government, despite repeated requests, has been reluctant to disclose the interest rates being charged by the developer. Jagdeo in October of last year during one of his weekly media engagement was asked to bring clarity on the issue when he said he was not going to “confirm anything”.  Also in the same month Exxon’s Country Manager, Alistair Routledge, in response to a question from this publication said that Guyana is not being charged an interest rate on its multibillion-dollar investments in the Stabroek Block. According to him, “ExxonMobil is not charging any interest on what we are recovering like for the Liza projects and the likes, we are not charging financing costs to Guyana so one of the things that’s been raised before is Guyana in debt to the Stabroek investors and it’s not true.” Routledge continued, “The country is never in debt; that’s the beauty of a production sharing agreement, it’s the investors (that) take all that investment risk. We invest the capital and the cost recovery mechanism only pays back the dollars we have invested, (so) there is no financing component.” In a bid to clarify the pronouncements made by the President of ExxonMobil Guyana Limited (EMGL), Kaieteur News asked the VP to confirm whether the information was factual at his Thursday press conference. In what turned out to be a failed attempt to shed light on this critical aspect of the country’s oil sector, the policymaker made it clear that he will not be confirming this state of affairs. The VP said, “I’m not confirming anything of that (nature). I’m not confirming anything. If he says that and there is an interest rate and there is a charged interest rate in the cost bank then it wouldn’t be allowed. So it’s a straight forward matter for me as far as I’m concerned.” Jagdeo has constantly dodged questions relating to the interest rates being charged by the oil company. During a press conference in November last year hosted by the Minister of Natural Resources, Vickram Bharrat, Kaieteur News specifically asked the Minister to confirm the rate of return on Exxon’s multibillion-dollar investments in the Stabroek Block. The Minister went on to provide an unrelated answer, explaining that Guyana was not investing in the oil and gas sector.  He said, “The government is not directly investing in the oil and gas sector. That is the misinformation I believe that is being spread and there is this perception among our people, that the government is taking the money and investing in oil and gas but if I ask you as the media how much money did Guyana invest in oil and gas in the oil and gas exploration offshore, we haven’t invested anything. We haven’t invested anything, not a dollar in the exploration, the upstream activities offshore Guyana.” IMF advice Meanwhile, several international organisations, such as the International Monetary Fund (IMF), have warned Guyana about the abuse that can take place when companies are allowed to recover 100 percent of the interest on its investments. In fact, the IMF cautioned in independent reports that Guyana should, as a protective measure, should cap the interest that is allowed for recovery. In a 2018 report, the IMF said “the treatment of interest expenses in the Stabroek Block PSA is very generous, constituting an important source of possible revenue leakage.” In fact, the IMF said it examined several scenarios which illustrated how “excessive or abusive” oil companies can be in the use of loans to fund oil projects. The IMF said it examined three scenarios, one of which looked at 75 percent to 100 percent of the development costs for the Liza One and Liza Two Projects in the Stabroek Block being funded by loans with a repayment period over 10 years with a 10 percent interest rate. The IMF said the revenue loss could be as high as US$2.6B. Such a practice, the organization said can have a “detrimental impact” on government revenue. Related Similar Articles

US$8.6M contract for Wales Power Plant control centre signed Jul 31, 2024 News Permanent Secretary of the Office of the Prime Minister, Alfred King signing the US$8.6M contract with Chief Representative of Power China International Group Limited, Dan Shen on Tuesday. – even as Govt. continues to hide key details on project Kaieteur News – The government through the Office of the Prime Minister on Tuesday signed the US$8.6 million contract with Power China International Group Limited out of Beijing, allowing for the construction of the Guyana National Control Centre (GNCC). Kaieteur News understands that the construction of the GNCC is a project being executed by the Office of the Prime Minister, and is aimed at managing the affairs of the gas-fired power plant. The award of contract was made public by the National Procurement and Tender Administration Board (NPTAB) which revealed on its website that the $1,827,929,605 (US$8.6M) contract was awarded on June 21, 2024. The duration of the project is set for 13 months and the building will be constructed at Beterverwagting, East Coast of Demerara (ECD). It was reported that the Office of the Prime Minister last year issued a tender seeking bids for the ‘Engineering, Procurement, and Construction (EPC) Services for the Construction of a Building for the Guyana National Control Centre’ and Power China International Group Limited was among several firms that bid for the contract. The tender document had stated that the control centre will support the integration and dispatch of the new 300 MW combined cycle gas turbine (CCGT) Power Plant and allow the Guyana Power and Light (GPL) to supervise, manage and control the new and upgraded power system. The Office of the Prime Minister explained that the scope of works includes all EPC activities necessary to complete the building and install all systems as specified in the employer requirements. This includes, but is not limited to, the contractor’s overall responsibility for designing, procuring, constructing, commissioning, defects notifications period, and maintaining the building to meet the specified performance and functional standards. The RFP also explained that, “The scope of work also includes the supply and installation of a complete diesel-fire generator set, with duty to operate continuously. The capacity of the generator set shall be ISO rated at 125% of the design load capacity of the GNCC Building. Additionally, the scope of work includes an appropriately dimensioned building to house the generator unit and ISO fuel tank capacity to allow for an autonomy of 24 hours.” The EPC contractor will be required to complete all civil works relative to the installation of the transformers, as directed by GPL. Quoted in a Department of Public Information (DPI) article, Prime Minister Mark Phillips at the contract signing ceremony said “This is important for the whole management of the transmission and distribution of the power that will be evacuated from the Gas-to-Energy project. So, the people of Guyana, come 2025 will benefit from adequate electricity,” New power plant Kaieteur News had reported that the 300-megawatt (MW) CCGT power plant is a component of the highly touted Wales Gas-to-Energy (GTE) project. It includes a 12-inch pipeline, being funded by ExxonMobil, to transport natural gas from the Liza One and Liza Two fields in the Stabroek Block, to the Wales Development Site. There, the gas will be processed by a Natural Gas Liquids (NGL) facility which will separate and treat its components to supply other products for resale, such as cooking gas. A portion of the treated gas will be utilized to generate some 300 MW of electricity to supply power to the national grid. The NGL facility and power plant are expected to be financed through a loan from the United States (US) Export Import (EXIM) Bank. Government has said the application is still pending approval. Notably, the pipeline component is expected to cost US$1 billion, while the contract for construction of the gas plants were awarded to CH4-Lindsayca, to the tune of US$759M. Gas-to-Energy agreements Meanwhile, with the construction of the National Control Centre said to be the last phase of the Gas-to-Energy project, the Guyana government has not yet released any of the agreements inked with ExxonMobil or the other contractors involved in the project. Pegged at US$2B, the GTE project is not supported by a feasibility study and it remains the single largest financial project ever pursued by Guyana. It was reported that since 2022, the government signed a Heads of Agreement (HOA) with the Stabroek Co-ventures, ExxonMobil, Hess and CNOOC, that outlines the principles and conditions for the commercial and technical arrangements of the deal. An artist’s impression of the Gas-to-Energy project. This publication reported that, three months ago, Vice President Bharrat Jagdeo during his weekly press conference was asked by this newspaper when the agreements would be made public when he said “maybe soon”. In fact, the Chief Policymaker for the oil and gas sector noted that the details of the agreement are already public knowledge. According to him, “Everything that you see in the agreement you know…we told you the price- US$750 million; we told you the timeline for implementation; you know how many turbines and what’s the size of the turbines…you know what the liquidating damages are.” Jagdeo therefore said, “Maybe soon, I don’t know. I don’t know. That’s for Gail Teixeira and the others” when asked when the agreements would be laid in Parliament. During a July 8th Sitting of the National Assembly at the Arthur Chung Conference Centre, Kaieteur News contacted Minister of Parliamentary Affairs and Governance, Gail Teixeira who explained, “I am not aware that the documents are ready.” The Minister pointed out that there are “different channels” through which documents must pass before she presents them to the House, insisting “they have a time that they go before the House, it doesn’t happen automatically.” Minister of Natural Resources, Vickram Bharrat during that same Sitting was also approached to provide a comment on the release of the agreements and said he was busy and would take the question later. After this newspaper insisted that he provided a comment, the Minister then requested that the question be sent to him at the time. Several attempts made by the Opposition in the National Assembly to access the agreements and key documents relative to the country’s single largest infrastructure project have been unsuccessful. It was previously reported that during this year’s Consideration of Estimates for Budget 2024, the Prime Minister again committed to lay over agreements for the project to the National Assembly. He explained that the construction phases of the projects are insured and related documents can be provided to the House. He was responding to MP Patterson on whether insurance is in place for the current works to support the gas plants and whether the government can lay those in Parliament. Related Similar Articles