Advocates for renegotiation of Exxon contract have made a major loss

The recent dismissal of a lawsuit against ExxonMobil’s Stabroek Block Production Sharing Agreement (PSA) marks a major loss for advocates pushing for changes to the contract. 

Glenn Lall, the publisher of Kaieteur News, a Guyanese daily newspaper known for its heavy criticism of the PSA and the country’s oil and gas operations, filed a case in Guyana’s Supreme Court last year to challenge the PSA. Lall contended that the contract was illegal and violated a set of legal principles. The Guyana government and ExxonMobil were parties to the case. 

After months of deliberation, Justice Nareshwar Harnanan dismissed Lall’s case in February. Attorney General and Minister of Legal Affairs, Mohabir Anil Nandlall emphasized that this was Lall’s opportunity to challenge the contract.

“So, all this pontification that you are seeing in the Kaieteur News and on Tiktok, about how unlawful… [and illegal] the contract is, he went to Court, and that is the place that he should have gone. He went there and he lost,” Nandlall said. 

Nandlall also warned that attempting to set aside the contract years after tens of billions of US dollars in investments were made, could have far-reaching negative consequences for those whose investments, and whose economic and social livelihoods have become connected to it.

Lall has indicated an intent to appeal the decision. 

The PSA has faced significant scrutiny locally, with critics saying it is more favorable to oil companies than to the country. The Guyana government has said that it will respect the sanctity of the contract as a show of good faith to investors. The contract is seen as critical to Guyana’s economic future, with the country projected to become the world’s largest per capita oil producer in the next few years, and an important oil supply component for the global energy transition.

Critics of the PSA argue that it grants ExxonMobil and its partners significant tax breaks, and that the country’s share of the revenue generated by the oil industry is too small. They argue that the contract should be renegotiated to reflect the interests of Guyana more effectively. However, Guyana has received more than US$2 billion in direct revenues since oil production began, as a result of the terms of the contract. Local Content also secured more than US$700 million for Guyanese nationals and firms in 2022. The oil boom has kicked off a larger economic boom, which has had unprecedented impacts on many of the country’s non-oil sectors.

Discourse over the PSA is emblematic of a broader debate around Guyana’s ability to utilise its newfound 11 billion barrels of petroleum resources to transform its economy in a manner that benefits all people equitably. There are countries that are rich in natural resources but have struggled to use them effectively to promote economic growth and development. Guyana therefore has a huge responsibility to guard against the Dutch Disease.