Stabroek Block Deal reviewed but top notch provisions – Jagdeo confirms
– He says other mechanisms will be used to gain more Guyanese benefits
By Kiana Wilburg
Vice President, Dr. Bharrat Jagdeo.
Kaieteur News – While the Stabroek Block Production Sharing Agreement (PSA) contains several weak provisions and has been reviewed by the People’s Progressive Party (PPP / C) administration, Vice President, Dr. Bharrat Jagdeo, bellucid that all the provisions of a will have a will to remain intact.
During a brief interview with this newspaper last night, Jagdeo said what the government is doing instead, is to use the review process as the platform for developing mechanisms that will bring greater benefits to Guyanese . He said this is the reason why a local content policy and a onshore gas project are being produced.
The Vice President said, “We are looking at several areas. Remember that we promised to review all contracts and see where we can get more benefits for Guyanese. As part of that review, we are committed to having a new PSA for all future contracts so that means going forward, everyone, including those who already have licenses, will have a completely different contract than the one for Stabroek which will have many more benefits. “
The officer reminded the commitment, which the government had made to ensure that it did not renegotiate the ExxonMobil deal as part of the review but instead looked at ways to get more benefits.
“That’s why we’re looking to get the local content out of the way and that’s why, for the gas-to-energy project, we made it clear that a significant part of the gas will have to become so free or well below market value. We believe, through those mechanisms and others, such as strengthening the license for the Payara project … that our people are likely to benefit far more than under the current contract and the way it was, ”the Vice President.
Kaieteur News would have revealed through an extensive study published in 2019 that Guyana’s PSA for the Stabroek Block has some of the world’s worst provisions compared to 130 other deals.
For example, the PSA says it sees the government paying the contractor’s income tax out of the country’s share of the profits. However, none of the 130 PSAs examined demonstrate this arrangement.
Further, Guyana’s PSA is the only one out of 130, which has very modest work obligations for contractors vested with offshore licenses.
In addition, Guyana-ExxonMobil’s PSA is the only one out of 130 contracts, which has no set-aside provisions to prevent the costs of unsuccessful wells being carried over to successful wells.
There is also no sliding scale for royalty to increase as productivity improves.
And that’s not all. The Guyana PSA is the only one out of 130 that allows full recovery of insurance premiums as well as interest on loans and financing costs incurred by the contractors.
The 130 PSAs examined are part of a register at www.resourcecontracts.org. (https://resourcecontracts.org/search?q=Production+Sharing+Agreement+)
That site offers over 620 PSAs from around the world to explore.
The Stabroek Block PSA was signed on June 27, 2016 and was due for renewal four years later (June 27, 2019). ExxonMobil and its partners, Hess Corporation and CNOOC / NEXEN will be required to surrender 20 percent of the contract area after June 2022.