Re-negotiate not the only route for Guyana to get better contract terms – Chatham House Expert
Kaieteur News – There has been much talk about the urgent need for a renegotiation of the Stabroek Block Production Sharing Agreement (PSA) between Guyana and petrol giant ExxonMobil. But Chatham House Associate Fellow, Dr. Valerie Marcel believes that renegotiating contracts may not be the only route available for Guyana to secure more favorable terms.
In light of the low oil market conditions following the COVID-19 pandemic, Expert Chatham House explained that oil companies face tremendous pressure from investors to focus on those projects only economically and where possible, with low sulfur content . In these circumstances, he said companies on the government’s doorstep will be looking for quick improvements or approvals. Dr. Marcel said this presents many opportunities for Guyana to bring companies to the table for concessions that are much more beneficial to the country.
“Every time they ask for an extension, every time they want to avoid a penalty, every time they come back asking for something… and the companies always come back asking for something , all of those opportunities are a moment to discuss something and trade for something you want. So I don’t think [renegotiation] does that matter, ”said Dr. Marcel during a recent interview on Kaieteur’s radio program, “Guyana’s Oil and You”.
Over the past five years, Kaieteur News would have reported that Guyana had left billions of dollars on the table when it negotiated a 2016 deal with ExxonMobil. To make matters worse, the deal is packed with a number of provisions, which leave the country open to abuse. These include pre-contract cost discrepancies; taxes paid by Guyana on behalf of the oil companies; unspecified interest rates charged to Guyana for loans taken out by the oil entities; weak provisions on environmental protection etc.
“I understand how frustrating it is for Guyana to be in an unfavorable contract…[But] renegotiating an existing contract is not the sort of solution to every problem that could be (supposed) presented, ”he said.
In addition, Dr. Marcel, while much focus is placed on contract terms, it is pertinent to note that the way a project is designed also includes opportunities for countries to retain “high value”.
“I want to emphasize that I think the project design is much more (important) … that’s where the great value lies. It’s not the sexual part of the discussion but that’s where the value is great, ”Dr. Marcel.
He pointed out that the Payara Field Development Plan (FDP) is one route for Guyana to capture value. But this was highly dependent on whether the government had all the tools, time and capacity necessary to ensure the project was developed in Guyana’s best interests, the Chatham House Fellow concluded.