— Jagdeo maintains, contends Harmon is ‘confused’– Payara Licence not a PSA

VICE-PRESIDENT, Bharrat Jagdeo, has maintained that the coalition-sanctioned Stabroek Block Production Sharing Agreement (PSA) with ExxonMobil and its partner, did not best serve the interest of Guyanese but the new government is committed to reviewing this agreement to allow for better local content, accountability and other things.
Under the PSA governing the Stabroek Block, Guyana will be receiving at 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.

The People’s Progressive Party/Civic (PPP/C), while in opposition, had criticised the agreement, and these criticisms still stand, said Jagdeo during a press briefing on Friday.
“The agreement did not serve the best interest of the people and we are committed to reviewing the Stabroek agreement to ensure we get more out of it,” said the Vice-President.
The review entails going through all the provisions in the agreement and identifying areas where Guyana can “get more” for its natural patrimony.
This process was, however, confused with the review of the Payara Licence, which recently got the “green light” from Government.

HARMON AT SEA
“Leader of the Opposition (Joseph Harmon) does not know the difference between production licence and production agreement,” said Jagdeo.
The Opposition Leader said: “PPP duped and deceived the people of Guyana as the Payara Block Agreement is very similar in terms to the Stabroek Block Agreement which the PPP and Bharrat Jagdeo in particular criticised endlessly while in the opposition.”
In response to Harmon, Jagdeo said: “We were not reviewing or negotiating the production agreement, we were negotiating a production licence and EPA (Environmental Protection Agency) permit… as most of the fiscal conditions were already established in production agreement.”
The Government of Guyana officially issued the licence for the project which was signed by both parties on Wednesday.
The project located in the Stabroek Block, is expected to produce up to 220,000 barrels of oil per day after startup in 2024, using the Prosperity floating production, storage and offloading (FPSO) vessel. The US $9 billion Payara development will target an estimated resource base of about 600 million oil-equivalent barrels and the largest single investment in the history of Guyana.
A review of the Payara Development Project, which is the company’s third field development in the Stabroek Block, was previously conducted by the Bayphase Oil and Gas Consultants contracted by the Department of Energy (DoE) under the previous administration.
The new People’s Progressive Party/Civic (PPP/C) administration, however, decided to review the work already undertaken by the DoE to ensure that the interests of all Guyanese are protected and are in keeping with international transparency and accountability standards. The review was done by a team of international experts, headed by Canadian Queen’s Counsel Alison Redford.
Jagdeo reiterated that the licence issued by government does not include royalty, profit sharing and so forth; it just outlines the conditions which ExxonMobil will adhere to and abide by while developing its Payara Project in the Stabroek Block.

WISHFUL THINKING
Some ‘critics’ had called for government to ‘hold’ the licence as leverage for the PSA to be revised, but Jagdeo said: “That is wishful thinking… a number of those people have never been party to these negotiations.”
The Vice-President maintained that the PSA will be reviewed but he also emphasised the importance of the US$9 billion Payara investment which is twice the country’s Gross Domestic Product (GDP) – just about US$4 billion.
“That means we cannot raise money ourselves… investments need to go ahead so that there is a stream of revenue that will come to Guyana… we want the development to take place,” said Jagdeo, noting that the conditions outlined in the Payara licence are more stringent than those outlined in the licences for the Liza Phases 1 and 2 developments, which were prepared by the former Coalition Government.
In the licencing agreement, the Government has insisted that routine flaring is strictly prohibited without the approval of the Environmental Protection Agency (EPA). It is stated that flaring to maintain oil production will not be permitted. And the company will pay the Government for the cost of gas wasted during flaring and will also be subject to fines under the EPA related to emissions from flaring.
The fine will be calculated by applying the Government’s profit gas and royalty percentage share for a given month to the flared volumes, multiplied by the lower of the following: Inside FERC Henry Hub Index price as published by Platts- a Crude Oil Marketwire- each month; or the sales price agreed for gas from the Stabroek Block.
According to the agreement, ExxonMobil is also required to update its “base design” for the project to include “tie-in points” and space for produced water injection equipment.

ANNUAL AUDITS
Additionally, ExxonMobil will have to facilitate and fully cooperate with annual audits of safety critical drilling and production operations, including waste management and compliance conducted by a “chief inspector”.
“Within 30 days of the licence and annually, on such date thereafter, for a total of five consecutive years, the company shall pay to an account controlled by the Government, the amount US$400,000 to be used by the Government for the procurement of the third party auditors to supplement the chief inspector’s resources and development institutional capacity for the ongoing conduct of audits under this paragraph,” said Government in its agreement with ExxonMobil.
The company’s expenditures and operations are, however, still to be fully audited, and Vice-President, Bharrat Jagdeo, had said Government will aggressively pursue costs incurred by the company.
ExxonMobil and its prime contractors have spent over $300 million with more than 700 local companies since 2015. More than 2,500 Guyanese companies are registered with the Centre for Local Business Development, which was founded by ExxonMobil and its co-venturers in 2017, to build local business capacity to support global competitiveness.
The Stabroek Block is 6.6 million acres (26,800 square kilometres) with current discovered recoverable resources estimated at more than eight billion oil-equivalent barrels. The 18 discoveries on the block, to date, have established the potential for at least five FPSO vessels producing more than 750,000 barrels of oil per day by 2026.