EXXONMOBIL’S 2016 Stabroek Block Production Sharing Agreement (PSA) with the Guyana government has been the recent subject of intense public discourse. Critics argue that the government should renegotiate the contract to secure better fiscal terms for the country. However, the People’s Progressive Party Civic (PPP/C) Government has consistently maintained that the PSA is not up for renegotiation, primarily due to the agreement’s stability clause and the importance of honouring contract sanctity. They have, however, acknowledged that the government of the day in 2016 could have achieved more favourable terms for the country.

At the heart of the current administration’s stance is Article 32 of the Stabroek Block PSA, known as the stability clause. It explicitly prevents the government from unilaterally changing the contract’s terms. It stipulates that any alteration of the agreement or imposition of new petroleum-related fiscal obligations requires the consent of the oil companies involved, namely ExxonMobil, Hess, and CNOOC. Should Guyana’s tax laws change in a way that materially harms the companies’ economic benefits, the government must compensate them or exempt them from the change. This ensures investors are protected and it is a crucial factor in high-risk, high-capital ventures as are common in this industry.

The consequences of disregarding this clause would be profound. First, unilateral action would jeopardise investments worth more than US$50 billion. That is the amount the Stabroek Block group has committed to spend on development projects offshore that will deliver billions of dollars to Guyana’s Natural Resource Fund (NRF). There is no precedent for this level of investment in Guyana’s history. Second, unilateral action would erode the trust of prospective investors who might be deterred by the possibility that contracts could be revised at the government’s whim. Guyana’s growing energy sector depends on external financing and expertise, so preserving confidence is essential to keep the economic momentum of the oil sector and the country.

Despite the dissatisfaction some feel regarding the 2016 terms, the government has wisely chosen to improve contract administration rather than risk undermining investor confidence. It has introduced a new model PSA for future contracts and existing contracts for blocks outside of Stabroek. These updated terms significantly increase government take by raising the royalty rate from 2% to 10%, reducing the cost recovery ceiling from 75% to 65%, and instituting a 10% corporate tax. While these terms do not apply to the Stabroek Block, they will be implemented in future offshore blocks, ensuring that those agreements reflect Guyana’s maturation as an oil and gas jurisdiction.

It is vital to recognise that direct revenue is not the only channel through which Guyana benefits from the oil industry. One prominent example is the Gas-to-Energy project, a partnership involving ExxonMobil, Hess, CNOOC, and the Government of Guyana. This project aims to bring natural gas to shore for power generation, and is expected to cut electricity costs by 50% and reduce emissions. The resulting cheaper energy will incentivise manufacturing, technology, and other industrial sectors, when the project is commissioned this year.

Another major benefit stems from the Greater Guyana Initiative (GGI), a US$100 million capacity-building programme launched by ExxonMobil and its partners. This effort supports entrepreneurship while investing in sports, training, and sustainable development projects. A centerpiece of the Stabroek Block group’s capacity-building efforts is the Guyana Technical Training College Incorporated in Berbice, where a US$13 million facility simulator (FacTor) was commissioned in 2024 to train local workers for well-paying jobs on floating production, storage, and offloading vessels. Further, a multi-purpose facility in Berbice, backed by a US$17.7 million contribution from the Stabroek Block co-venturers, is set to host thousands of spectators for sporting events and concerts.

Local content development is another advantage, ensuring that Guyanese businesses and workers actively participate in the sector. More than 6,000 Guyanese have found employment in the industry, and local companies are earning hundreds of millions of U.S. dollars annually by providing goods and services to oil operators.

By respecting the sanctity of the Stabroek Block PSA, Guyana maintains investor confidence while reaping social and economic benefit. Honouring the 2016 PSA sends a message that the nation is a reliable partner. Meanwhile, new contracts will incorporate improved terms to secure even greater benefits, in hopes of more discoveries.