Cabinet discussing Exxon contract

…No immediate intention to review it

Amid calls for a review of the Petroleum Agreement between ExxonMobil and Guyana, President David Granger on Wednesday said the contract is currently being discussed at the level of Cabinet.

“These matters are before Cabinet and it depends on the determination Cabinet arrives at. But the contract is an agreement between two parties and these things have to be approached very carefully. There is no prospect at the present time, it is the intention of Cabinet to review it, but as I said it is before Cabinet,” President Granger told reporters. At the time, he was speaking on the sideline of a swearing in ceremony at State House on Wednesday. Under the present contract, which was entered into by the A Partnership for National Unity + Alliance for Change (APNU+AFC) Administration, Guyana will receive 50 percent of the profits as an equal partner in addition to a 2 per cent Royalty.

Meanwhile, Minister of Natural Resources, Mr. Raphael Trotman, in an invited comment told the Ministry of the Presidency Public Relations Department that the Government is committed to receiving the best possible advice as it works to develop the oil and gas sector, noting that the administration is in receipt of support from a number of agencies. While there is a lot of commentary on the matter, Minister Trotman said that Government is receiving a broad range of advice from qualified sources, adding that the Ministries of Natural Resources, Finance, Public Infrastructure and other sector agencies have been working with international organisations such as the Commonwealth, the United Nations Development Programme (UNDP), the Mexican Petroleum Institute and the Chatham House.

“In addition to [Advisor to the President on Petroleum], Dr. [Jan] Mangal’s advice, we have, over the last two years, been steadily building capacities and we have to start with the Energy Government Capacity Initiative, which is coming through the US [United States] Government. They have been here working with both Ministries of Finance and Public Infrastructure and to some extent the Ministry of Natural Resources. That is an ongoing project. We have Chatham House, the Royal Institute of International Affairs and they have held several seminars and have been providing support and advice to us on all aspects of the industry. We have a [Memorandum of Understanding] signed with the Government of Mexico and the world famous Mexican Petroleum Institute, which has been providing

support, advice and even some scholarships to Government. We also have support coming from Government of Canada, UNDP; we are in talks with Trinidad and Tobago to lend some support. We are also receiving support from Brazil so there is no end of experts,” he said.
Support at the national level also includes the work of the Commonwealth Secretariat and the Inter-American Development Bank (IDB), as well as, the International Monetary Fund (IMF). “In particular we have the Commonwealth Secretariat drafting Laws for the last few years. We have completed drafts for the Petroleum Commission to be established, a review of the Petroleum Exploration and Production Act and we have regulations, which we have sent out to the various Ministries. There are a host of advisors all of who are working overtime. We also have teams from the Inter-American Development Bank (IDB) and the International Monetary Fund (IMF). Government is receiving support and advise from a range of sources and not necessary from one person or one entity. These are all ongoing engagements,” he said.

Minister Trotman also reaffirmed Government’s commitment to transparency and accountability in the sector, noting that the administration is cognizant of the need for accountability to the Guyanese people. “It was this Government that decided to take us into membership of the Extractive Industry Transparency Initiative (EITI). In September 2017, we became the 53rd member of the EITI and that shows that we are not just talking but that we are making moves and it was in record time that we were accepted. We have also attended conferences for the Open Government Partnership. We are in the process of releasing the other contracts from this weekend. The people can see what obtained in the past and what obtains now,” he said.

Last week President Granger made it clear that it is Government that has to assess the advice it receives and balance those against national priorities to define policy for the good of all Guyanese.
Under the contract with ExxonMobil and its partners, Guyanese are expected to benefit from “preferential treatment” in the provision of goods, materials and sub-contractual arrangements with ExxonMobil’s petroleum operations here. Article 18 of the Agreement states that the operator of the contract Exxon’s subsidiary–Esso Exploration and Production Guyana Limited (EEPGL) shall give preference to the purchase of Guyanese goods and materials.

This is providing that such goods and materials are available in a timely manner and of the quality and quantity required by the company and at a competitive price. In addition, preference shall be given to the employment of Guyanese sub-contractors “insofar they are commercially competitive and satisfy the Operator’s financial and technical requirements “and meet conditions of time, quality, quantity and competitive pricing.
According to a section of the agreement, within a sixty-day period prior to the commencement of a calendar year, Esso and its partners CNOOOC Nexen Petroleum Guyana and Hess Exploration Guyana Limited which hold interests in the Stabroek Block , and the subject minister shall provide a yearly plan for the utilisation of qualified Guyanese personnel for the upcoming year. Both parties shall then meet to discuss the plan’s effectiveness.

Additionally the oil company is required under the agreement to provide the subject minister, within a month after the end of each half-year, reports outlining the company’s achievements in utilizing the services of qualified Guyanese personnel. Appropriate adjustments are also required to be made to better accomplish the goal of increasing the number of qualified Guyanese available for use by the oil firm in its petroleum operations and entities performing petroleum operations in Guyana.

Criticisms
However there have fierce criticisms of the contract by both civil society and the political opposition. The Private Sector Commission (PSC) in a statement back in January said much more should have been done to incorporate local content and greater benefits for businesses here in the petroleum agreement between the government and ExxonMobil’s subsidiary. It stated that though the cost of energy is currently the primary limitation to the expansion of business and growth in Guyana, there is nothing in the agreement to indicate that Guyana owning such large oil reserves would translate into reduction of the costs of energy to Guyanese. “The business sector and general populace of Guyana deserve to benefit directly from the abundance of oil at its disposal and we look forward to seeing future Agreements for other blocks offshore include provisions with greater benefits to Guyana and its people,” the PSC said, adding that it expects that for all other blocks offshore, the Agreements with operators/contractors will consist of provisions that will ensure Guyana receives more royalty, rents, training and development for Guyanese and better local benefits for all Guyanese. For his part, Chartered Accountant Christopher Ram has said that the government has managed to make a bad contract even worse. According to him the 2016 Agreement binds the country to this Agreement into perpetuity.

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