…gov’t releases full contract with Exxon
…seeks stable relations with company

GOVERNMENT on Thursday released the full petroleum agreement with ExxonMobil at a high-level forum held at the Ministry of the Presidency and Natural Resources Minister, Raphael Trotman said this country is seeking a long-term relationship with U.S. oil giant and has been advised not to court other companies to work the Stabroek Block.

“We have received much advice from many sources, some of which we have dispersed and dispensed with but some of it has been wholesome and one such bit of advice that was given is that “owing to our relative small size as a nation with less than a million people, our relative underdevelopment and our relative inexperience we should try to stabilise our relationships rather than go out and court 15 and 20 companies to come into our waters and develop the resource, we should try to manage what we had discovered, build better relations with the company that had made the discovery and make that a long-term objective,” Trotman told the forum held at the Ministry of the Presidency.

Attended by President David Granger, Prime Minister Moses Nagamootoo, cabinet ministers and Members of Parliament, the forum sought to allay the fears of some who had questioned the motive of government’s delayed release of the contract signed since 1999 between ExxonMobil and the People’s Progressive Party, but slightly adjusted on the APNU+AFC government taking office.

During presentation on the contract it was disclosed that Guyana stands to gain some US$7Billion over a twenty-year period from the LIZA Phase One well only. (See other story on page3)
Hosted by Minister of State Joseph Harmon the presentations were made by Trotman and Exxon Country Manager Rod Henson. Minister Trotman gave a background and overview of the contract while Henson made a detailed presentation on the terms of the contract, focusing on those aspects which were renegotiated.

Speaking at the forum, Trotman said the release of the document “is indeed quite an outstanding day in the annals of Guyana that in the history of our country it will be written about for years to come.” Giving a background to the new contract signed in 2016, Trotman noted that when the APNU+AFC coalition entered office in May 2015, days after there was a significant find as described at the time by ExxonMobil. He said later in that year the company went on to give definition to that find as it was described and concluded that the Liza field by itself contained a minimum of 800M barrels of recoverable oil to a possible 1.4B barrels of oil. Thereafter, the minister said Exxon drilled a well known as Skipjack, which turned up dry. He noted that anyone involved in mining would know that if skipjack had been drilled and explored first it very well could have changed the dynamics, because Exxon may have concluded that the Stabroek Block was not a fruitful basin to explore.

“Drilling a well is expensive business and can run to several hundred million dollars per well.” Thereafter, Trotman said other wells were drilled and yielded successive discoveries and on each occasion “I recall receiving the news feeling a sense of heaviness and I would pass the news onto His Excellency that “Sir there’s been another discovery” and I would hear his voice drop as well, because it was another layer of responsibilities that fell on our shoulders. So we have made discoveries, GoG and Exxon at the Payara well, at the Snoek well and recently known as turbot.

3.2B barrels
“Together, I can announce I believe that it’s our right to let the people of Guyana know…together the reserves that are known in those wells to date approximate to about 3.2B barrels of oil. That is more than many many many countries in the world have and it is significant that we know that figure; we can multiply that figure by US$50 which is considered the base price per barrel of crude oil today, Guyana is entitled to 50percent of that together with a 2percent royalty,” Trotman stated.

Contract
As it relates to the contract, Trotman said when his government took office on the 26th of May when President David Granger was inaugurated, the Government of the Bolivarian Republic of Venezuela issued decree #1787, which redrew the maritime borders or purported to withdraw the maritime borders of Venezuela, taking in with that redrawing or purported redrawing the Liza field and most of the maritime zone previously known to be Guyana’s. “So that is how this government started its work and it is in that context that many decisions were made against that backdrop.” Trotman said as a result, government took a decision not to have an expansive review and renegotiation to the contract with Exxon, recognisng that the company had made the discovery, it is considered one of the top two oil developing and petroleum-producing companies in the world and it was the only company that was brave enough to venture into our waters and explore for oil, when many others either felt afraid to do so and many others, in fact one company in particular, was run out of our waters and its ship arrested and escorted elsewhere by a corvette.

“So we recognised that we have with us a company that had 1) made a discovery; had a binding contract with the government and people of Guyana which had been signed in 1999; was brave and committed to developing the resource; had the capacities — financial and technical capacities to do so and government believed that it should enter into a long-term stable relationship with this company.”

No flirting
“We have received much advice from many sources, some of which we have dispersed and dispensed with but some of it has been wholesome and one such bit of advice that was given is that “owing to our relative [sic] small size as a nation with less than a million people, our relative underdevelopment and our relative inexperience, we should try to stabilise our relationships rather than go out and court 15 and 20 companies to come into our waters and develop the resource, we should try to manage what we had discovered, build better relations with the company that had made the discovery and make that a long-term objective.”

He said it was the decision of the government to continue the agreement which had been entered into by the previous administration “and that we would make minor modifications rather than enter into protracted long-term negotiations with the company. To that extent, we were able to raise some of the fees…we were able to introduce a 2percent royalties where previously there was 0 royalty. Some people have said that the royalty should have been 10%, some say 20%.

Trotman however explained that there are different types of contracts. There is the production share or the profit-sharing contract which is what the government inherited in 1999 and there is also the royalty-based contract, he noted. He said that under the profit-sharing contract, Guyana will receive 50 percent of the profits as an equal partner, even though it has not sunk a single cent into the development of the block. “We however decided that we would come up with a hybrid of that production-share agreement and put a feature of a royalty on top of that. Many countries have either the production share or the royalty-based, we decided that we’d try to enjoy the best of both worlds and were successful in convincing Exxon, even though there was no legal basis on which a renegotiation could pursue because there was no frustration of contract, there was no breach of contract, the only things that changed were a discovery and a change of government; but it was a binding, lawful contract which Exxon was entitled to enforce should we decide not to accept it,” Trotman explained.

Making reference to Venezuela, Trotman mentioned that countries near and far have tampered and interfered, “in fact, one country had an arbitration award against it nearby to the west of us where it sought to acquire the assets the very assets of the very company, ExxonMobil. So for strategic and other reasons I’m saying, we chose not to enter into a full renegotiation of this contract. And so based on our efforts and by our calculations, we can now receive on a daily basis when production commences in 2020, close to US$1M per day. So at the end of the day, Guyana will earn about US$300M annually, which is as a result of what some may determine to be a modest royalty rate, but it is significant because this is money that does not come from a grant or a loan…this is money that will come to us on a daily basis,” the Natural Resources Minister said.

No flaring of gas
Additionally, Trotman said government also determined that under no circumstances there will be flaring of the gas. He said it is common industry practice that there is flaring “and we determined that given the green approach and the commitments made by His Excellency that Exxon would not flare the natural gas which accompanied the find.”
Billions of cubic metres of natural gas is flared annually at oil production sites around the globe, the World Bank has said. Flaring gas wastes a valuable energy resource that could be used to support economic growth and progress. It also contributes to climate change by releasing millions of tons of CO2 into the atmosphere. During oil production, the associated natural gas is flared when barriers to the development of gas markets and gas infrastructure prevent it from being used. The World Bank Group has a leadership role in gas-flaring reduction through the Global Gas Flaring Reduction Partnership (GGFR), a public-private initiative comprising international and national oil companies, national and regional governments, and international institutions. GGFR works to increase use of natural gas associated with oil production by helping remove technical and regulatory barriers to flaring-reduction, conducting research, disseminating best practices, and developing country-specific, gas-flaring reduction programmes.

No Giveaway
Meanwhile, responding to speculation and accusations that he and the government had given away the Stabroek Block, Trotman said: “For the reasons which I’ve stated earlier and the strategic importance of having this company develop the resource on your behalf, we sought to maintain the exact proportions of the grants it had been given by the PPP/Civic administration in 1999. We did not take a single millimeter, neither did we add a single millimetre to what had already been given to Exxon. So the claim about us giving away the resources and losing for it, I’m amazed given the fact as I said that we will earn the value of the resources already about US$160B with Guyana being entitled to half of that.”

Trotman said he is sometimes bemused as to why there are persons clamouring for more money, “when in fact we should be more concerned about how are we going to manage this resource being less than a million, how are we going to protect this resource because there’s going to be others who any want to come and share it with us…sometimes not by choice, but by force. So those are some of the primary concerns of the government…how do we protect what we have, rather than going out…“we’re entitled to US$80B we want now US$90B,” he commented.