-Dr. Jagdeo affirms

The People’s Progressive Party (PPP) General Secretary, Dr. Bharrat Jagdeo, affirmed the government’s stance on not changing Guyana’s new Production Sharing Agreements (PSA) to suit ExxonMobil’s future ventures.

He made these remarks on Thursday during a press conference at Freedom House, where he explained that the purpose of the agreement is to ensure that Guyanese fully benefit from its oil and gas resources thus, the core terms, especially the core financial terms, are settled.

Dr. Jagdeo said: “We are not going to weaken the new PSA to suit ExxonMobil.

“This is not the era where they will draft a Cabinet decision for the Ministry of Natural Resources and the government of the ministry will then take a cabinet decision drafted by Exxon to the cabinet for approval and that is what happened on the 2016 agreement.”

Clyde & Co International Law Firm, a company headquartered in London, England, hired by the APNU+AFC Coalition to present an “independent” report on an investigation into the circumstances leading to the execution of the Petroleum Agreement June 27, 2016 – the renegotiated ExxonMobil contract.

Their report stated that an ExxonMobil official, Brooke Harris, drafted Guyana negotiating position for the new ExxonMobil deal. It added that the Cabinet Memorandum that was approved to green-light the renegotiation with ExxonMobil was based on email correspondences and drafts exchanged between the APNU+AFC Coalition and ExxonMobil.

The report, on page 29, said: “We understand that on 25 May 2016 Mr (Brooke) Harris provided by email a first draft Cabinet Memorandum.”

Page 30 added: “We understand that the Cabinet Memorandum was prepared further to the email correspondence and draft versions exchanged between Mrs Homer and Mr (Brooke) Harris during the period 20 May to 31 May 2016.”

Dr. Jagdeo said: “This is a new government, a different dispensation, so if they were sweetened by that approach. It is not going to happen now…I saw Mr. (Alistair) Routledge’s comments that he cannot sign the new PSA in its current form. He probably got sweetened by the 2016 agreement, the Stabroek PSA, and therefore they are comparing the two and they think the conditions are onerous. We don’t believe the conditions are onerous. They were canvassed by an international advisor and were told they were not onerous, and they would allow for effective management of the sector. If they don’t want to accept the conditions of the new PSA – and I am not saying there cannot be some minor changes, but not the core terms, not the fiscal terms, those fiscal terms are settled …. we are not going to weaken the new PSA to suit ExxonMobil. If they don’t want to sign it, fine, they don’t have to sign it.”

The fiscal terms of the PSA for the Stabroek Block have been the subject of debate and contention for some time. There has also been considerable misinformation – some willful and intentional – around profit sharing, royalty rates, cost recovery, Guyana’s obligations, and those of the Stabroek Block co-venturers, to advance the narrative proffered by some that Guyana is getting a bad deal.

But the government, despite some of the challenges that come with a rapidly expanding oil sector and economy, has heeded the advice of experts, bi-lateral partners and consultants in and outside Guyana to create a framework to maximise the gains from production for Guyanese.

Guyana is the global leader in total offshore discoveries since 2015, with 11.2 billion barrels of oil equivalent, amounting to 18% of discovered resources and 32% of discovered oil, according to a 2022 report from Rystad Energy.

Under the terms of the 2016 Stabroek Block PSA, Guyana is entitled to two per cent of all pre-cost revenues as a royalty and 50 per cent of all profits with a cost recovery ceiling of 75 per cent, which is roughly average when compared to agreements with other frontier oil and gas countries international consultancy Wood Mackenzie found in a 2020 report.

The average government take, which refers to the value received by the government over the life of a license in the form of royalties, profit sharing and taxes, will generally be around 60 per cent of profits or 14.5 per cent of overall revenues when both the pre-cost royalty and the post-cost profit sharing are accounted for and is expected to increase until 2025. Guyana’s earnings topped US $1.2 billion last year with another US $1.6 billion expected this year. Analysts predict that the country could reach US $7.5 billion annually in 2030.

The fiscal terms of the new model PSA include a 10 per cent royalty rate and 65 per cent cost recovery ceiling. The profit share will remain 50/50 between the government and the contractor, with a new corporate tax of 10 per cent.

At the time of the signing of the Stabroek PSA, generous fiscal terms helped draw in companies to invest in an unproven frontier region. Now, as Guyana can boast significant offshore reserves, and future deals will reflect lower risk levels and offer a higher percentage of revenues to the government.