A lawsuit filed in January with Guyana’s Supreme Court seeks to strike down clauses in ExxonMobil’s Stabroek block Production Sharing Agreement (PSA) which grant the company, its co-venturers and their sub-contractors a series of effective tax waivers for development works with respect to the licensed area. Guyana’s Attorney General, Mohabir Anil Nandlall, is currently the only respondent in the case, on behalf of the government.
Esso Exploration and Production Guyana Limited (EEPGL), Exxon’s Guyana subsidiary, filed a petition with the Court last Thursday, signaling its intent to litigate in opposition to the suit in which it “has a very real and substantial interest,” court documents state.
Newspaper publisher, Glen Lall, has asked the Court, in his lawsuit, to strike down most of Article 15 of the Stabroek PSA, which deals with taxation and royalty. Lall repeatedly argues through the daily Kaieteur News that the incentive-based tax regime in the contract is unfair. The lawsuit claims the contract is inconsistent with some Guyanese law, including anti-discrimination laws, and takes issue with the fact that the waivers also apply to sub-contractors.
In Exxon’s application to join the case, its lawyers argue that it has the biggest stake in the matter, and the most to lose. Exxon is the operator of the Stabroek block. Guyana has already approved three major projects to produce billions of barrels of oil. Liza Phases One and Two are ongoing, while Payara is scheduled for first oil in 2024.
“The petroleum agreement was solemnly negotiated with the Guyana Government,” Exxon’s application states. “Certain fiscal arrangements therein agreed with the Guyana Government make the Liza Phase 1 Project, the Liza Phase 2 Project and the Payara Project financially feasible and commercially viable.”
Exxon argues that with those arrangements, the co-venturers “have been able to develop the Stabroek Block offshore Guyana into a series of world-class projects,” and that if the lawsuit succeeds, “that would cause Esso and its co-venturers economic disruption, confusion, and uncertainty… [as well as] potentially unsustainable financial loss and damage.”
Guyana’s former Minister of Natural Resources, Raphael Trotman, who signed the agreement in 2016, thought it necessary to grant favourable terms to the Exxon-led Stabroek block consortium because of geopolitical implications. Venezuela has long laid a claim to two-thirds of Guyana’s territory, including where Exxon has so far discovered 10 billion oil-equivalent barrels. Trotman’s administration had rebuffed criticisms of the deal, arguing that having a consortium of two American oil companies (Exxon and Hess) and one Chinese company (CNOOC) gave Guyana some protection from its larger Bolivarian neighbour.
Guyana’s current government has made its differences with its predecessor known, on the terms of the contract, but gave assurances on numerous occasions that it will preserve the deal.
Justice Nareshwar Harnanan, the judge presiding over the case, is expected to hear oral arguments (or written submissions) for Exxon’s petition on or after Thursday.
