– agreement was signed by former President Donald Ramotar

THE government’s hands are tied to terms of the Production Sharing Agreement (PSA) for CGX Resources Inc, signed by then President and Minister with Responsibility for Petroleum Donald Ramotar, on behalf of the Government of Guyana.

The Ministry of Natural Resources made the agreement public on Saturday, fulfilling a commitment the government made to eventually make all petroleum agreements and agreements in the natural resources sector generally, available to the public.

However, the agreement signed in 2013 prevents the current administration from seeking a better arrangement with regard to any of the provisions contained in the agreement.
A good example is the one per cent royalty which is to be paid by the government from their share of the production. This was similar to the original ExxonMobil Production Sharing Agreement. However, this was amended to two per cent to be paid by ExxonMobil and its joint-venture partners HESS and CNOOC Nexen following discussions with government in 2016.

The Stability of Agreement Clause of the CGX Resources Inc PSA prohibits the Government of the Cooperative Republic of Guyana from amending, modifying, rescinding, terminating, declaring invalid or unenforceable, or to require the renegotiation, replacement or substitution, or to alter or limit in any way without the prior written consent of the contractor, CGX Resources Inc.

Numbered 32 in a 33-clause agreement, the Stability of Agreement clause restricts government from increasing the “economic burdens of the contractor by increasing any fiscal obligations, including but not limited to new taxes, new royalty, duties, fees, charges, value-added tax or other imposts”.

If there is a change in the law or laws and that change has an adverse effect on the economic benefits of the contractor, then the government must take affirmative action to restore the lost or impaired benefits to the contractor.

The agreement said that in the event of the contractor’s overall economic benefits being adversely affected, the parties have 30 days in which to attempt to meet an agreement on remediation. If after 120 days the parties cannot reach an agreement, then the matter may be referred to arbitration.