– Exxon says sanctity of contract important to long-term investment

By Lisa Hamilton

WHILE some experts have been pushing for government to renegotiate its Stabroek Block Production Sharing Agreement (PSA) with ExxonMobil and its partners, President of ExxonMobil Guyana, Alistair Routledge has stated that reviewal, not renegotiation is on the table for talks with the government.

In a meeting with the media on Wednesday, Routledge said that ExxonMobil does not believe that its contract with the Government of Guyana leans in the Company’s favour, and renegotiation of existing contracts can lead to future investment complications.

“We have had very little discussion with the government. What they have emphasised is that they will review the contracts, but they are not seeking to negotiate the contracts. And I think that’s really important for the country for the long-term, because, internationally, contract sanctity is very important to oil companies. If we enter into contracts in a country and those are changed down the road, then it’s very difficult for us to make commitments on projects that typically have 20-30-year investment life. So, how can we make those investments if we’re unsure whether the terms will change?” Routledge explained.

He said that it is important for persons to understand that sanctity of contract is important to long-term investment, and this goes for all investors; not just ExxonMobil.

Seeking to explain his point further, Routledge brought up the Payara Development Project, which is under review by a team of international experts, headed by Canadian Queen’s Counsel, Alison Redford. The project is expected to see the drilling of up to 45 development wells, but approval is first needed, at least by September, to prevent the delay of the project further by some 9-12 months.

Speaking to the fact that investment dollars will flow to where it is competitive, as opposed to where long-term investment challenges exist, he said: “…the Guyana portfolio is one of the better opportunities for us at ExxonMobil, but it’s not the only one. And, indeed, if we don’t get the agreement as we’re looking for in Payara, the investment money will go elsewhere in ExxonMobil’s portfolio.”

However, several media houses published Routledge’s statement as a threat to the Government of Guyana to quicken its pace to complete the ongoing review.

OUT OF CONTEXT
In a subsequent release, Esso Exploration and Production Guyana Limited (EEPGL)’s Public and Government Affairs Adviser, Janelle Persaud said that some media reports took Routledge’s remarks out of context.

She clarified: “Routledge was referring to the impact further delays could have amidst the current weak oil market conditions due to the global pandemic that has tightened available funding for projects worldwide.”

The release stated further that ExxonMobil Guyana will continue to work closely with the Government to develop the country’s resources for the long-term benefit of the people of Guyana, and a timely approval of additional proposed projects, including Payara, will ensure that the local workforce and the utilisation of local suppliers will continue to grow.

A DIFFERENT VIEW
Routledge disagrees with the sentiments of some that Guyana’s PSA with his company gives Guyana a bad deal.

“I don’t believe that it is more in favour of ExxonMobil than it is for this country. I think our interests are aligned; if the contract was more challenging for us, then, to be honest, I don’t think, in this environment, investment dollars would be coming to Guyana. It is a global business, and especially in these days, where commodity prices have fallen, the investment dollars will flow to where it is competitive,” he said, adding:

“I just don’t want this to be a sense that this is a contract that is so far different from everything else that we would potentially invest in.”

Under the Production Sharing Agreement (PSA) governing the Stabroek Block, Guyana will be receiving, at a minimum, two per cent royalty on all oil produced in the Block, plus 12.5 per cent profit oil. As the capital and operating costs are liquidated, Guyana’s share of profit oil will increase, rising up to 52 per cent return on every barrel of oil sold.

When it comes to the review of the existing contract, the ExxonMobil Guyana President said that he can see this process bringing greater attention to the areas of Local Content and accountability.

He said: “First of all, the review informs, so everybody understands really what is in the contract, what are our roles and obligations, are we all living up to those. But also, it identifies what it is it that’s not in the contract that we can work on together, and I think local content is one of those areas where, while we have made a lot of progress…there is still more that can be done. And part of me coming is [because] I have a lot of energy in this space to accelerate this.”

Guyana completed its Local Content policy in February 2020, but there is no Local Content legislation to effect mandatory local involvement.