– from Exxon contract, a top gov’t priority, says Dr. Bynoe

THE Government of Guyana, though not committing to revising the Petroleum Sharing Agreement (PSA) it signed with Esso Exploration and Production Guyana Limited – a subsidiary of U.S. oil giant ExxonMobil, said it will take necessary steps to reduce value leakage.

Since the release of the ExxonMobil contract late December last year, government has received fierce criticisms from both civil society and the political opposition over several aspects of the agreement – from the percentage of royalty to the signature bonus and on issues such as local-content provisions. It has since made it clear, that it will not renege on the revised contract.

Director of the Department of Energy (DoE), Dr. Mark Bynoe, in a recent interview with the Guyana Chronicle, said government will continue to engage the oil giant to minimise value leakage.

“In terms of revisiting, revising, renegotiating, again it is way too early for the department to be speaking on that, but we will continue to engage deeply to ensure that we reduce value leakage where that is possible,” Dr. Bynoe said.

He explained that with the help of international experts, the Department of Energy will be working with the Guyana Revenue Authority (GRA) and the Audit Office of Guyana to conduct cost-recovery audits of ExxonMobil.

“We have to ensure that we reduce any leakages that may occur based on the existing PSA,” Dr. Bynoe emphasised.

The GRA has initiated an audit of the costs Exxon has claimed under the cost-recovery provisions of the PSA, but its capacity is limited, hence, the need for assistance from international experts.

GRA has asked ExxonMobil to provide “specific breakdowns” of some cost-recovery numbers preceding the Liza discovery. ExxonMobil’s “pre-contract” costs are reported to be around US$460 million—that includes the expense of extensive seismic and geologic surveys and early-stage exploration beginning in the 1990s.

Estimated costs for developing Liza Phase 1 will run into the region of US$4.4 billion, which includes the cost of drilling wells; building floating production storage and offloading vessels; crewing ships and setting up onshore facilities and everything else that goes into developing a massive new oil prospect.

The cost-recovery audits aside, Dr. Bynoe said the Department of Energy is in the process of revising the Model PSA to ensure that Guyana gets a larger share. He noted that emphasis will be placed on areas which would increase the country’s revenue flow.

PSA MODEL GOING FORWARD
“We are hiring technical expertise to provide us with a model PSA which can then be used to engage with other companies going forward,” he told this newspaper.

Under the present contract with ExxonMobil, Guyana will receive 50 per cent of the profits as an equal partner, in addition to a two per cent royalty.

Additionally, Guyanese are expected to benefit from “preferential treatment” in the provision of goods, materials and sub-contractual arrangements with ExxonMobil’s petroleum operations here, in keeping with Article 18 of the agreement.

According to a section of the agreement, within a 60-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.

Prime Minister of Trinidad and Tobago, Dr. Keith Rowley, during his recent visit to Guyana said the sanctity of contracts must be respected – a view which was expressed by President David Granger and his government.

“We respect the sanctity of contracts, while not accepting that contracts are written in stone. Contracts are engagements really between at least two parties or more and when we make contracts and if there is goodwill between the participants; and if the intention is for both participants to benefit from the nature of the contract, we see the opportunity and the possibility of contracts being revisited, so as to maintain that balance of the elements of the contract and that is the basis on which we have approached the multinationals and we do so out of respect; and we do so out of competence,” Prime Minister Rowley had said while fielding questions from reporters.

While not criticising Guyana’s PSA with ExxonMobil, Prime Minister Rowley encouraged the country to carefully assess the current circumstances when engaging companies.