The Private Sector Commission (PSC) today said that the Petroleum Agreement between Guyana and ExxonMobil’s subsidiary and its partners was deficient in key areas and better negotiators should be hired for future contracts.

A statement from the PSC follows:

Hire Better Negotiators for Future Contracts

The Private Sector Commission (PSC) of Guyana has noted the disclosure of the Petroleum Agreement between ExxonMobil, Hess Corporation and CNOOC and the Government of Guyana.

While we believe that the disclosure of the Agreement bodes well for a transparent and accountable oil and gas industry, we have some concerns.

Based on the information provided we can now make an objective assessment of the terms of the Agreement.

As an initial commentary, it is the opinion of the PSC that much more could have been done to incorporate local content. In addition, we were expecting that greater benefits would have accrued to local businesses. This, we find, is sadly lacking.

With respect to the International Monetary Fund (IMF) suggestions regarding provisions for exploration and developmental costs, we find that the ring-fencing provisions have not been addressed.  As a result, Guyana will be left to bear the costs of unsuccessful exploration.

A matter of great interest also is the fact that given the early stage of development, Guyana does not have the right to re-negotiate the terms of the Agreement. This is specified in Article 32, Stability of Agreement Clause, of the contract.  We are concerned, since this Agreement encompasses the entire Stabroek Block, an area of 6.6 million Acres of water with 3.2 billion barrel of equivalent oil (BOE) so far. With the projected massive oil discoveries the Commission believes that there should be increased flexibility given to the Government of Guyana, to ensure a fair and equitable deal on both sides.

At present the cost of energy is the primary limitation to the expansion of business and growth in Guyana. There is nothing in the Agreement to indicate that with Guyana owning such large oil reserves, this would translate into reduction of the costs of energy to Guyanese. The business sector and general populace of Guyana deserve to benefit directly from the abundance of oil at its disposal and we look forward to seeing future Agreements for other blocks offshore include provisions with greater benefits to Guyana and its people.

We also expect that, for all other blocks offshore, the Agreements with operators/contractors will consist of provisions that will ensure Guyana receives more royalty, rents, training and development for Guyanese and better local benefits for all Guyanese through the enlisting of the services of world class negotiators who can competently negotiate with major oil companies.