Balance interests of Guyana, investors in reviewing 2016 agreement with ExxonMobil; full guarantees necessary for oil spill – analyst

Last Updated on Monday, 30 September 2024, 20:48 by Writer

The People’s National Congress Reform/A Partnership for National Unity’s (PNCR/APNU) 20-point plan, including to seek a revision of the Production Sharing Agreement (PSA) with ExxonMobil Guyana and obtain a parent company guarantee for an oil spill clean-up, has been lauded by United States-based commentator and professor, Terrence Richard Blackman.

Dr Blackman, who is also an analyst on a range of business issues, said a review of the 2016 PSA was necessary in light of the rapid development of Guyana’s oil sector. He advised that such a review should be undertaken with the national interest at the forefront, ensuring that the benefits from oil production are maximized for the people of Guyana while maintaining a fair and stable environment for investors.

“This review is not and should not be about undermining previous agreements or discouraging investment; instead, it is about adapting to new realities to serve the broader national good. As stewards of Guyana’s resources, we are responsible for ensuring that our natural wealth is used to uplift all Guyanese. Any adjustments to the PSA must reflect a balance between the interests of the country and those of the companies investing in our oil sector, with a focus on long-term sustainability,” Dr Blackman, a mathematics professor at Medger Evers College, told Demerara Waves Online News.

He has also hosted several virtual panel discussions with a variety of experts on the oil and gas sector.

PNCR Leader, Aubrey Norton at the weekend insisted on the need to bring ExxonMobil, the contractor for the Stabroek Block, to the table to discuss increasing the royalty in the PSA first signed in 1999 and updated in 2016 because they are “two totally different environments.” Broadly, the existing PSA provides Guyana with a two percent royalty, crude entitlement, and 12.5 percent profit oil.

“What is clear is that there is scope for you to revisit the contract but it has to be done by the government, writing the contractor and then you are engaging to make the changes,” he said on his party’s weekend edition of Nation Watch.

Mr Norton said Guyana needed to acknowledge the benefits flowing from the oil sector and increase them while recognising that foreign companies need to make money on their investment. “It has to be reasonable and it has to be done in a way that the people of Guyana can benefit,” he said.

Professor Blackman said that due to the volatility of the global oil market and Guyana’s evolving position, the terms of agreements must be reviewed periodically to ensure they remain aligned with the national interest. He added that key considerations such as ring-fencing provisions, environmental responsibilities, and operations transparency must be scrutinized to protect Guyana’s long-term interests.

Against the background of the PNCR/APNU’s plan to revise the Environmental Protection Act, appoint an independent petroleum commission and establish an inspector general’s office to investigate alleged corruption, Dr Blackman said by implementing best practices in transparency and regulatory oversight, Guyana could ensure that the profits generated from oil are shared equitably and used to support the nation’s development.

He also recommended that the plan delineates the roles and responsibilities of different regulatory bodies, including the petroleum commission and the inspector general’s office, to avoid confusion, duplication of efforts, and potential regulatory bottlenecks.

In his “An Analysis of the PNCR/APNU Administration’s Governance Plan“, he said an absence of specific deadlines for implementing key initiatives increases the risk of delays and inefficiencies. Establishing clear timelines for forming the advisory team, restructuring the petroleum commission, and enacting anti-corruption measures is crucial for effective implementation, he said.

Oil-spill coverage

Professor Blackman also agreed with the PNCR/APNU’s intention to reinstate full liability coverage for oil companies operating in Guyana, saying that is crucial in protecting the country’s environmental and economic well-being. He said ensuring that oil companies are required to have comprehensive insurance policies, including specific coverage for oil spills, is a forward-thinking approach to risk management. He urged that such guarantees transcend political divisions, as it speaks directly to the need to protect Guyana’s natural resources and the livelihoods of future generations.

“The insistence on full liability coverage, alongside parent company guarantees, ensures that Guyana will not be left to shoulder the financial burden in such a disaster. The importance of these safeguards extends beyond any single government; they represent a commitment to Guyana’s long-term environmental and economic security,” he said.

For his part, the PNCR Leader sought to justify the need for maximum coverage by the company itself. “If there’s an oil spill, why would we be using our resources to cover it and that is why we call for the parent company guarantee or we agree with a parent company guarantee so that ExxonMobil guarantees the people and government of Guyana guarantees that, in the case of an oil spill, the parent company will cover it,” Mr. Norton said.

Dr Blackman said the costs of a spill could be immense financially and ecologically in an environmental disaster such as an oil spill. He said prohibiting gas flaring and ensuring the reinjection of toxic water in compliance with international standards reinforce Guyana’s responsibility as a steward of its natural resources. Those measures, he said, would help position our country as a responsible global oil and gas industry player, prioritizing sustainability alongside economic development. These initiatives reflect a commitment to protecting our environment for future generations while capitalizing on the opportunities presented by oil production.

Historical examples like the 2010 Deepwater Horizon oil spill, which resulted in over $60 billion in damages, provide sobering reminders of the stakes involved, he said.

While the plan includes environmental safeguards, he recommended that it strengthens with more stringent regulations on spill prevention, emergency response, and long-term ecological monitoring.