Guyana’s Head of State, President David Granger has downplayed the notion of renegotiating the Production Sharing Agreement between the South American country and ExxonMobil affiliate – Esso Exploration and Production Guyana Limited.
Speaking to members of the media on Wednesday at State House, the President said, “there is (currently) no prospect (of renegotiation) at the present time… it is the intention of Cabinet to review it, but as I said it is before Cabinet.”
He further added, “…these matters are before Cabinet and it depends on what determination Cabinet arrives at.”
He was however adamant, “the Contract is an agreement between two parties and these are things that have to be approached very carefully.”
The David Granger coalition Government in 2016, after taking Office, re-negotiated the 1999 PSA it had inherited. That PSA was inked between the then Janet Jagan Government and ESSO. A US$18M signing bonus along with 2 percent royalty was added in the 2016 amended agreement.
The PSA, since its public release in December 2017, has been the subject of public scrutiny and calls for a complete renegotiation by sections of civil society, including members of the political opposition.
Minister of Natural Resources, Raphael Trotman has repeatedly defended the agreement, insisting that the amended document provides additional gains for the country.
Addressing media operatives recently, at the Ministry of Natural Resources’ Boardroom, Mr. Trotman said, “when we weighed in the basket, the balance, the scale, what we were getting as against not getting it was decided…this was what we were going to content ourselves with.”
The Guyana Government will receive two percent royalty off the top and 50 percent of profit oil. At an average price of $50 per barrel, the country is set to receive approximately US$1 million per day, from day one of production, a sum that will increase when the initial cost that was incurred by ExxonMobil and its partners is cleared, after about 5 years.
On the two percent royalty, amid speculations that Guyana should in fact be receiving more, Trotman fired back saying under the renegotiated terms, the country would earn two percent as against the zero it had initially accepted (in 1999).
“The contract that we inherited had a zero royalty,” according to Mr. Trotman. While the original contract pointed to a one percent royalty to be paid to Guyana, Mr. Trotman explained that under that (1999) PSA, government would have to pay itself the one percent royalty out of its earnings from profit oil.
“In essence, it was only in name but in practical terms the royalty was zero,” he stated.
ExxonMobil will begin oil production in Guyana in March of 2020 with the Liza Phase 1 development, in partnership with Hess and CNOOC Nexen.