June 25, 2017

That Oil Contract

The adamant refusal of the PNC-led APNU/AFC coalition to release details of the oil production contract it negotiated with the ExxonMobil-led consortium is more than troubling; it is frightening.

This obdurate stance comes in the face of calls by a wide swathe of civil society organisations – including the local Transparency International (TI) body and the Guyana Bar Association (GBA) – and not only the Political Opposition, the PPP, but a member of the coalition body that makes up APNU – the WPA.

At a minimum, one can say the majority of the country is demanding that the contract details be made public. It is not that the citizens of Guyana believe the consortium, comprised of the US companies ExxonMobil and Hess Oil, and the Chinese CNOOC, is particularly rapacious; but it is just that they are au fait with the standard practices of oil companies across the Third World – particularly in Africa, where countries are at a state of development that is similar to Guyana’s. And those practices demonstrate that countries have to be vigilant.

Realising that the rationale offered by Prime Minister Moses Nagamootoo for non-disclosure – it would jeopardise ongoing negotiations on the Venezuelan Border controversy – was risable, Minister of State Joseph Harmon attempted what can only be labelled “damage control”. He offered, in addition to the “security concerns” articulated by the PM, that there were also “legal” barriers raised by the governing 1997 Petroleum Act. He was presumably referring to Part II, Section 4, which states: “no information…by a licensee shall be disclosed to any person who is not a Minister, a public officer or an employee of the Guyana Geology and Mines Commission, except with the consent of the licensee”.

But even at a most cursory examination, the terms of the contract are not “information (by the) licensee”, to which the Petroleum Act refers. From the practice of the industry, “information (by the) licensee” is, for example, proprietary information gleaned by the licensee in its exploration activities or from its plans on developing and exploiting the field. In other words, it is information that can offer its competitors on the market a competitive advantage.

What are the salient aspects of the contract that Guyanese are interested in? The royalty percentage is one – and that this has been the one detail revealed by the Government is very disturbing. It is disturbing because the average royalty imposed on oil production in Africa – which were “frontier” oil territories like us because of the undeveloped infrastructure – is over 10%. And these are countries that regularly complain of being given the short end of the stick in negotiations with oil companies. If the PNC-led APNU/AFC Government is willing to boast about negotiating a measly and pitiable 2% royalty rate, the mind boggles at the details it refuses to reveal.

To rub salt into the wound of non-disclosure, the Government is being quite dishonest – not disingenuous – when it insists on labelling the 2% royalty as a “200% increase of the 1% imposed on the original contract negotiated by the PPP in 1999”.

The PPP had signed a contract even before anyone had any evidence there was oil offshore. The US Geological Survey had not yet released its data gathered from space-based mapping. Tullow was not to discover oil off Ghana until 2007, and then speculate that across the coast of South America, from which Africa had split off eons ago, there might be “mirror fields”.

In 1999, the PPP Government had to be on its knees to entice Exxon to commit to exploration. But last year, when the PNC-led APNU/AFC Government began negotiating with Exxon, the contract had expired by its own terms, and the billion-barrel oilfield had already been confirmed. The Government was now in a stronger position to negotiate. If a 1% increase in royalty is the best the Government can do, imagine what the figures on “cost-oil vs profit oil” or corporate taxes on Exxon’s profits will be. All Guyanese must demand this information.