ExxonMobil rules out signing new stringent PSA; govt willing to consider minor non-fiscal amendments

Last Updated on Thursday, 19 October 2023, 21:26 by Denis Chabrol

ExxonMobil’s planned refusal to sign the new model Production Sharing Agreement (PSA) over concerns about Guyana lacking capacity to grant approvals was Thursday strongly rebuffed by the Guyana government.

“We said we got feedback on the PSA and would not sign it as it was,” ExxonMobil Guyana’s President, Alistair Routledge told a news conference this week.

Vice President Bharrat Jagdeo on Thursday left the door ajar for possibly minor changes to the PSA. “I’m not saying that it would be hard-and-fast and there would be nothing, like minor things changed when we get to the contracting stage but not the core terms, not the fiscal terms. Those fiscal terms are settled. We are not going to weaken the new PSA to suit ExxonMobil so if they don’t want to sign it; fine they don’t need to sign it,” he said.

He interpreted Mr Routledge’s views as the need to weaken the PSA because Guyana did not have the capacity to ensure compliance and urged him to be more concerned about producing and submitting data on time. “His comment, ‘oh, we may lack capacity’ . The way I saw it is that we must weaken the provisions of the Act or the PSA because we don’t have the capacity to ask for all of this information and process all of this information…. We don’t subscribe to that all,” he said.

Mr Jagdeo stressed that the fiscal terms– an increase in royalty from 2 percent to 10 percent, profit oil from 12.5 percent to 17.5 percent, and 10 percent corporate tax–would see Guyana earning more from future production wells would not be amended to suit the American supermajor.

The Vice President reminded that the new PSA and the Petroleum Activities Bill were drafted by IHS Markit that has international experience in the oil and gas sector, and “very familiar” with fiscal and relinquishment regimes in other countries. The documents, he added, were put out for public consultation and received a number comments from various groups and shared with the consultants and some were included. Mr Jagdeo said efforts were being made to put in place systems to “police”the industry and ensure compliance.

The President ExxonMobil did not voice any specific concerns about the fiscal regime and said it was “quite normal” that the new terms would seek to increase government’s revenues compared to the high-risk period of no discoveries and later on a mere single discovery. However, he said new rules in the PSA that require a string of approvals were “less attractive” and those were reflected in the consultations and the bid for another deepwater oil block. Concerns centered around the “extremely short periods” to acquire contracts, acquire and process data prior to relinquishment of areas and make future decisions. “There are a lot of approvals that are required under the new PSA that, quite honestly, today I do not think the Ministry (of Natural Resources) is set up to process, review and to exercise those even if they were the right authority to do that,” he said. Mr Routledge believed that there was an imbalance between the approvals required, including the amount of oversight, and the expectations of the operator to go ahead and do the work.

ExxonMobil is the operator in the Stabroek Block and the co-venturers are Hess Corporation and the China National Offshore Oil Corporation (CNOOC).