Guyana to seek better royalties and terms for future oil contracts

Country’s vice-president’s remarks after investigation highlighted concerns about ExxonMobil deal

Guyana will seek much better terms for any future oil deals than their contract with ExxonMobil, the country’s vice-president said on Tuesday.

Floodlight

The tiny South American country has become one of the most desired oil exploration spots after an ExxonMobil-led group, which also includes the US-based exploration firm Hess Corp and the Chinese oil company CNOOC, discovered about 9bn barrels of recoverable oil and gas off the coast.

But a Guardian-Floodlight investigation on Tuesday highlighted concerns about both the terms of the deal and the environmental consequences for Guyana. The investigation quoted industry analysts at IHS Markit who said the Guyanese government was receiving a below-average return on ExxonMobil’s projects. The company receives more than 85% of the proceeds, as a result of the government and public largely “absorbing Exxon’s costs”, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

ExxonMobil said the deal would continue to generate billions of dollars of revenue for Guyana. Yet the investigation found its government had reported it made just $309m (£225m) from the projects since they began, while ExxonMobil and its partners had brought in roughly $1.8bn, according to Tom Sanzillo, director of financial analysis at the IEEFA.

Guyana will aim to increase its oil royalties and revamp other contract terms as part of a new profit-sharing agreement (PSA) for future crude and gas projects now in its draft stage. It expects to install an energy regulatory body this month and will disclose the winner of a one-year contract to market of oil production from the Stabroek block, which is located about 120 miles off Guyana.

The new PSA will be tougher than that negotiated with the ExxonMobil consortium and could be ready “within six months or so”, said Guyana’s vice-president, Bharrat Jagdeo, on the sidelines of the Offshore Technology conference in Houston, according to Reuters.

ExxonMobil had told the Guardian: “The terms of the contracts are competitive with other agreements signed in countries at a similar resource development phase. Our work and the support of the government of Guyana are the basis of a long-term mutually-beneficial relationship that has already created significant value for the people of Guyana.

“These resources are being brought on line at a record-pace for the industry, resulting in significant cost savings for the government and its industry partners as multiple developments are being processed.”

The government has been at odds with ExxonMobil over flaring at its Liza project, the first one producing crude in Guyana after discoveries.

“We have made it clear that in any new PSA we negotiate for those blocks, the conditions will be very, very different than the ones from the Stabroek block,” Jagdeo said, including higher royalties and mechanisms for deducting costs from investment.

Previous Guyanese governments have been criticised for the lucrative terms provided to companies involved in the Stabroek block.

“All the deficiencies of this contract will be addressed,” Jagdeo said.

In his conference presentation on Tuesday, Jagdeo pushed back against campaigners who were quoted in the Guardian/Floodlight investigation calling for Guyana to leave the oil in the ground, saying the calls were “totally unfair … because the world is going to continue to use fossil fuels in the future”, and Guyana should be allowed to benefit from this demand. In the article, the investor advocacy group, As You Sow, criticised Exxon’s plans to open a massive new oil frontier in Guyana in the face of the International Energy Agency’s recent recommendations that there should be no investment in new fossil fuel supply.

But Jagdeo argued: “We’ll develop our oil industry, putting in place regulations for safe, low carbon operations.”

He agreed with the argument in the Guardian that Guyana’s oil sector was being developed more rapidly than its ability to put in place the necessary capabilities and frameworks to ensure adequate oversight and management, and he detailed steps the government is now taking to increase its regulatory authority. But, he added, “our policy is to get as much of the oil out of the ground as quickly as possible ... We have to make use of this resource while there’s still demand.”

ExxonMobil has been approached for comment.

  • Antonia Juhasz is a journalist based in New Orleans. She is a Bertha fellow in investigative journalism

Contributor

Antonia Juhasz for Floodlight and Reuters

The GuardianTramp

Related Content

Article image
Guyanese citizens challenge ExxonMobil offshore drilling on climate grounds
Case is first in Caribbean to challenge fossil fuel production on climate and human rights grounds

Isabella Kaminski

31, May, 2021 @10:28 AM

Article image
Anger over World Bank's $55m pledge to Guyana's fossil fuel industry
Campaigners say move is ‘blatant contradiction’ of lender’s climate commitments

Jasper Jolly

27, Feb, 2020 @6:00 AM

Article image
Exxon’s oil drilling gamble off Guyana coast ‘poses major environmental risk’
Experts warn of potential for disaster as Exxon pursues 9bn barrels in sensitive marine ecosystem

Antonia Juhasz for Floodlight

17, Aug, 2021 @10:15 AM

Article image
Revealed: big oil's profits since 1990 total nearly $2tn
BP, Shell, Chevron and Exxon accused of making huge profits while ‘passing the buck’ on climate change

Matthew Taylor and Jillian Ambrose

12, Feb, 2020 @12:17 PM

Article image
World Bank accused over ExxonMobil plans to tap Guyana oil rush
Washington DC-based bank grants funds to redraft south American state’s oil laws by lawyers linked to oil giant

Jasper Jolly

08, Mar, 2020 @2:35 PM

Article image
How big oil keeps a grip on New Mexico – with the help of a major lobbyist
Records show the firm FTI and its fossil fuel clients benefit from local government ties

Cody Nelson for Floodlight and Adrian Hedden for the Carlsbad Current-Argus

11, Jul, 2021 @10:00 AM

Article image
EU told ExxonMobil that TTIP would aid global expansion, documents reveal
Trade chief told oil giant in secret talks that free trade deal could address its concerns over regulations restricting activities in developing countries

Arthur Neslen in Brussels

23, Feb, 2016 @4:03 PM

Article image
Fossil fuel firms' social media fightback against climate action
Industry funds ‘grassroots’ resistance to tougher rules while touting green credentials, study shows

Sandra Laville and David Pegg, with analytics from Michael Barton , Sam Cutler and team

10, Oct, 2019 @11:00 AM

Article image
'Greenwashing': fossil fuel execs to hold invite-only forum at UN climate summit
BP, Shell and Chevron representatives will be at event on sidelines of UN climate summit

Sandra Laville

18, Sep, 2019 @6:01 AM

Climate change fears overblown, says ExxonMobil boss

Rex Tillerson acknowledges man-made global warming in speech, but says society will adapt to climate change

Associated Press

28, Jun, 2012 @9:50 AM