Guyana risked significant investment fallout if oil agreement was scrapped, renegotiated

Last Updated on Friday, 10 February 2023, 18:04 by Denis Chabrol

President Irfaan Ali on Friday sought to justify the People’s Progressive Party Civic (PPPC)-led administration’s decision not to scrap or renegotiate the Production Sharing Agreement (PSA) between government and the ExxonMobil-owned Esso Exploration and Production Guyana Limited (EEPGL).

While in opposition, the PPPC had criticised the PSA that had been inked by the A Partnership for National Unity+Alliance For Change (APNU+AFC)-led government and EEPGL in 2016, citing several unfavourable terms. But in government, Dr Ali said government opted to preserve the PSA.

He  told the commissioning of two heavy lift berths, located on Demerara River side lands previously owned by the Gafoors and Vierias, that Guyana risked facing protracted legal action, injuring the investment climate, capital flight, loss of national credibility and the plugging of the wells if it had dishonoured the agreement. “It’s not far-fetched! Look around at our neighbours about agreements that were not honoured and see the consequences,” he said in apparent reference to Venezuela where several foreign-owned oil companies’ agreements had been broken.

According to the Guyanese leader, if the oil sector had halted over the PSA, there would have been a “serious financial run”, there would have been fewer hotels, transportation services and less expertise. “Guyana now has a project management team that is the first to deliver a crane and a berth of this capacity in the region,” he said.

Dr Ali said if Guyana had disavowed the agreement, oil production would have been halted, companies would have lost investment opportunities and hundreds of Guyanese would have been unable to pursue careers in oil and gas. In that regard, the President urged the business community to let their views be known publicly about the jeopardy Guyana would have faced if the PSA had been renegotiated. “You guys have to start speaking out. This is a national matter. What would have been our signal to international investors unless we are not concerned about signal and you are willing to sacrifice democracy and the rule of law; when you are willing to put a nation’s credibility at the altar of power,” he said.

While Guyana prepares to draft a new PSA that would see the country earning more from future developments in blocks other than Stabroek, he restated that government has been able to secure additional benefits from EEPGL without amending their PSA. “We  looked at it, we analysed it, we weighed the option and we took a series of actions so we have chosen, instead, to take the prudent path of clawing back greater benefits from the existing oil deal and to signal very clearly that future oil agreements will be governed by different and improved terms,” Dr Ali said.

Under the existing PSA, EEPGL and ExxonMobil share the 25 percent profit oil and the 75 percent goes to cost oil to recover investments in exploration, exploitation, employment and infrastructure.

Guyana Shore Base Incorporated (GYSBI) started operations five years ago with the provision to ExxonMobil of eight acres of laydown yard, two berths and one warehouse. Today, the company boasts of having 155 acres, eight warehouses and four berths. “This exponential growth has been largely fuelled by the unparalleled success Exxon has had in its exploration activities and the ability of GYSBI to fulfill its client’s needs,” Executive Director, Robin Muneshwer said.  He said the shorebase was fully integrated to provide tubulars, fuels, water, drilling fluids, cement, water, waste management and wash-bays. GYSBI employs 705 employees, 95 percent of whom are Guyanese.

The company has invested US$35 million in its shorebase.