Guyanese leaders and their position on renegotiation of Exxon’s contract
Kaieteur News – The renegotiation of Guyana’s Production Sharing Agreement (PSA) with ExxonMobil Guyana Limited (EMGL) has been a contentious issue, drawing varied responses from the country’s political leaders.
This article delves into the positions held by key figures, as it relates to the PSA signed in 2016 with ExxonMobil and its partners, Hess Corporation and China National Offshore Oil Corporation (CNOOC).
Who signed the deal?
Former Minister of Natural Resources, Raphael Trotman, during his tenure under the APNU + AFC Coalition government between 2015 and 2020, was the one who signed the deal in 2016 with Exxon. The deal Trotman signed waives all taxes from the oil companies, gives Guyana a 2% royalty on its rich resources, and agrees to the oil companies recovering 75% of investments before the remaining 25% is shared, with Guyana receiving 12.5%. The arrangement, with the lack of ring-fencing, sees Guyana paying for projects that are yet to commence production activities. Each month, bills from future producing developments are added to the list of expenses to be cost-recovered by Exxon.
Notably, last year Trotman emerged as a vocal advocate for renegotiation. In his book titled ‘From Destiny to Prosperity’, Trotman criticized the terms he negotiated, describing them as unfavorable to Guyana’s interests. He publicly supported revisiting the agreement to secure more equitable benefits for the country. Despite his advocacy, Trotman’s calls for renegotiation were met with resistance from the current administration.
PSA amended before
In 2019, the Coalition government approached the Exxon consortium, and successfully renegotiated a critical fiscal element.
According to Addendum No. 1 to the Petroleum Agreement dated April 26, 2019, it was evident that the named parties were in agreement that the contract allowed for the 2% royalty to be recovered.
To plug this loophole, the Addendum that was subsequently filed with the Deeds Registry categorically stated that it shall not be recovered in any way.
Sealing the new arrangement were former President, David Granger and President of Exxon, Rodney D. Henson. Affixing their signatures as witnesses were former Head of the Energy Department, Dr. Mark Bynoe and the country’s Petroleum Advisor at the time, Matthew Wilks.
The foregoing document was first disclosed by Chartered Accountant and Attorney-at-Law, Christopher Ram in his column that was published in the Stabroek News.
The Addendum for which this newspaper has secured a copy, states that the parties engaged in discussions and “in the interest of the avoidance of all doubt, the parties have come to a mutual and satisfactory agreement that the payment of royalty pursuant to Article 15.6 of the Petroleum Agreement shall be borne solely by the Contractor.” It goes on to state that “the said royalty payment shall not be recoverable cost, in any manner or formulation under the Petroleum Agreement.”
Annex C of the PSA, specifically subsection 3.3 titled “Costs not recoverable under the agreement” was then modified and amended to also include: (h) payments of royalty by the contractor made in accordance with Article 15.6 of the agreement.
Despite the aforementioned, the lopsided deal remains in place. The following are the positions held by President Irfaan Ali, Vice President Bharrat Jagdeo, leader of the People’s National Congress/ Reform (PNCR), Aubrey Norton, leader of the Alliance for Change (AFC) Nigel Hughes and others – shedding light on their perspectives regarding the crucial oil deal.
President Irfaan Ali
Irfaan Ali was sworn in as Guyana’s 9th Executive President on August 2, 2020. Ali has maintained a firm stance against renegotiating the existing PSA. In an interview with the BBC, Ali acknowledged criticisms that the deal skewed benefits in favor of ExxonMobil, stating, “We did not have the best of deals.”
Despite recognizing the deal’s shortcomings, Ali underscored the importance of upholding the sanctity of contracts, asserting, “We cannot go back and renegotiate.”
The People’s Progressive Party (PPP/C) has consistently dispelled claims that they promised to renegotiate the Stabroek Block PSA, while in opposition.
Vice President Bharrat Jagdeo
Vice President Bharrat Jagdeo has been equally steadfast in his opposition to renegotiating the Exxon PSA.
Jagdeo, a key figure in Guyana’s energy policy, reiterated during press conferences and interviews that the current contract’s terms must be respected to maintain investor confidence. He underscored the economic benefits Guyana derives from the agreement, including substantial revenue and job creation in the oil sector. Jagdeo defended the government’s decision by stating, “We have a PSA that determines our shares of the proceeds, so we are limited by that.”
Former President Donald Ramotar
While President Ali and Vice President Jagdeo have staunchly defended the existing contract, citing the principle of sanctity of contracts and the potential legal ramifications of altering terms unilaterally – the only person in the PPP camp that has taken a different position is former President Donald Ramotar.
Ramotar has publicly said that he would have renegotiated the lopsided deal. “It’s better to fight than not to fight at all,” he said.
The former head-of-state has described the current contract as detrimental, depriving Guyana of vital resources, and expressed his willingness to renegotiate for the country’s benefit.
He said, “I am one of the persons who believes that the contract is a very bad contract…that deprives us of a lot of resources.”
As such, he continued by stating that he would have been in agreement to renegotiate the deal to seek more benefits for the country. To this end, Ramotar acknowledged the current administration’s reluctance to change the existing deal while noting that they have explored alternative avenues to maximise benefits for the nation.
PNCR Leader Aubrey Norton
Aubrey Norton has taken a nuanced position on the Exxon PSA, advocating for amendments without explicitly calling for renegotiation. Norton expressed this stance during a press conference in response to a question from Kaieteur News about whether Guyana should consider Trinidad and Tobago’s offer to assist in renegotiating the contract.
Norton emphasised that while Guyana should be open to utilizing advice from other nations, he rejects the term “renegotiation” due to its implications, stating, “no one is going to choose the language we use on this question.”
Norton clarified that he advocates for using legal provisions within the existing contract to engage ExxonMobil for better terms without formally reopening negotiations. He highlighted the importance of respecting the “sanctity of contracts” under international law, indicating that his stance is informed by thorough discussions.
Trinidad’s Minister of Energy, Stuart Young, had offered T&T’s expertise in renegotiating contracts, citing their successful experience in the gas industry. Norton acknowledged such offers of assistance while asserting Guyana’s sovereignty in determining its approach to managing its oil resources.
AFC Leader Nigel Hughes
Nigel Hughes, prominent attorney and newly elected leader of the AFC has taken a cautious stance regarding the contentious issue of renegotiating the oil deal. Days before his election as leader Hughes declined to comment on the potential renegotiation of the contentious 2016 oil deal saying that the company is a client of his law firm.
Hughes, a prominent attorney and former AFC Chairman, who was successful elected leader of that party on Saturday, made these remarks during an appearance on Dr. David Hinds’ programme ‘Politics 101’ on June 27.
During the interview, Dr. Hinds asked, “Nigel as leader of the AFC, are you going to urge the party to renegotiate the contract, if it gets into power by itself or with other parties? The oil contract I’m talking about with Exxon…”
“David I, I will say this and I think I said it the other night…Exxon is a client of our firm, I’m making it public now so nobody can’t say that I have never made it [known]. Several oil companies are clients of our firm. I cannot comment on that,” Hughes responded.
Notably, Hughes stated that while he is unable to comment on renegotiating the lopsided deal, he has other plans if elected. He stated, “What I have said is that I will set up committees and if we get into government, commissions that are specifically dedicated to dealing with oil, generally.”
“I will insist that they hire the best professional advice internationally, both in terms of law in terms of economics, and in terms of the business of oil because the business of oil is the most sophisticated business on the planet because it runs the planet,” Hughes continued
Former EPA Director Dr. Vincent Adams
While a number of key political figureheads have in the past-adumbrated varying positions when it comes to the renegotiation of the PSA, former Director of the Environmental Protection Agency (EPA), Dr. Vincent Adams says otherwise.
Dr. Adams had pointed to the provision in the contract and suggested the fact it exists in the PSA; is indicative of the fact it can be renegotiated.
The provision obtains at Article 13.2 of the PSA but comes with the caveat — the renegotiations and happens only with a signed written agreement between all of the parties involved.
According to that provision in the PSA, commonly referred to as the contract, “This Agreement shall not be amended or modified in respect except by written agreement entered into by all the parties which shall state the date upon which the amendment or modifications shall become effective.”
According to Dr. Adams, “since way back in 2016, I was on the front page of the newspapers calling for a renegotiation of the contract.”
He was adamant, “nothing has changed my mind.” In fact, he posits, “to me anyway the government still owes the people of Guyana the obligation to renegotiate that contract and don’t let anybody tell you that contract is not renegotiable.” The former EPA Director insists the contract spells out provision for renegotiations and said, “If it was not the intention that it can’t be renegotiated, that clause would not be there.
He reminded nonetheless of the caveat calling for a written agreement by all parties involved to say, “…the parties must have to agree to renegotiate, I would love to see government tell Exxon (Mobil) we want renegotiation.”
According to Dr. Adams, “when I hear people say we can’t renegotiate, that’s absolute nonsense.” He was adamant, “it’s in there, the clause was put in there because there’s a possibility that it could be renegotiated, don’t let anybody fool you and tell you that it can’t be renegotiated because we sign it.”
