GEORGETOWN, Guyana, January 12, 2018 (CMC) – The Private Sector Commission (PSC) has expressed concern about the recently-released contract between the government and US oil giant, ExxonMobil.
Last weekend, the PSC said, while the contract, released just a few days ago, is welcomed, it believed more could have been done to incorporate local content.
“We were expecting that greater benefits would have accrued to local businesses. This we find, is sadly lacking,” the PSC said in its assessment.
Concerning suggestions from the International Monetary Fund (IMF) regarding provisions for exploration and developmental costs, the PSC said, “We find that the ring-fencing provisions have not been addressed. As a result, Guyana will be left to bear the costs of unsuccessful exploration.”
The PSC also expressed concern that Guyana does not have the right to re-negotiate the terms of the agreement moving forward.
“We are concerned, since this agreement encompasses the entire Stabroek Block, an area of 6.6 million acres of water, with 3.2 billion barrels of equivalent oil (BOE) so far. With the projected massive oil discoveries, the Commission believes that there should be increased flexibility given to the government of Guyana, to ensure a fair and equitable deal on both sides,” the PSC statement noted.
The Commission also noted that, at present, the cost of energy is the primary limitation to the expansion of business and growth in Guyana, and “there is nothing in the agreement to indicate that with Guyana owning such large oil reserves, this would translate into reduction of the costs of energy to Guyanese”.
The group believes that the business sector and general populace of Guyana deserve to benefit, directly, from the abundance of oil at its disposal, and we look forward to seeing future agreements for other blocks offshore include provisions with greater benefits to Guyana and its people.
Additionally, the PSC noted that it also expects that, for all other blocks offshore, the agreements with operators/contractors will consist of provisions that will ensure Guyana receives more royalty, rents, training and development for Guyanese and better local benefits for all Guyanese through the enlisting of the services of world class negotiators.
The contract was first signed in 1999 under the previous People’s Progressive Party government. It was revisited and modified, last year, after the new government took office in 2015.
Guyana stands to benefit upwards of US$300 million a year under the agreement when oil starts to flow in 2020. Guyana will be receiving a two percent royalty under the current agreement.
The original 1999 agreement did not cater for any royalties. Additionally, Guyana will also receive 50 percent of the profits from oil production.
The agreement also specifies development in several areas for the country.