Updated: Sep 1, 2020
By: Melissa D. Goolsarran Ramnauth, Esq.
Guyana’s energy resources have been in the international forefront in recent years.
On June 27, 2016, Guyana and Exxon entered into a new deal, the Stabroek Block Production Sharing Agreement, concerning the Stabroek oil block. The deal is arguably to Guyana’s extreme disadvantage because it precluded Guyana from receiving $55 billion dollars. This estimate, by OpenOil, is based on similar contracts within the industry. Guyana is only receiving 52% of revenue compared to 73% that other similarly situated countries are receiving in oil deals.
Exxon claims that the deal is based on Guyana’s status as a new frontier rather than a mature area with a lower risk, and the border dispute with Venezuela. Their stance has been criticized since Exxon announced a massive find only 3 days after signing. If the evidence was revealed sooner, Guyana would have had a stronger bargaining and negotiating position.
As for the specifics of the Stabroek deal, Exxon is paying $1 million per year to lease the oil block, and $600,000 per year to promote employment, environmental, and social development in Guyana. Exxon also paid an $18 million signing bonus.
This week Exxon’s Country Manager, Alistair Routledge, stated: “Guyana is one of the better opportunities for us in the ExxonMobil portfolio (but) it is not the only one. And indeed, if we don’t get the agreement as we are looking for on Payara (the company’s third Field Development Plan), the investment money will go elsewhere in ExxonMobil’s portfolio.” Such comments were likely made to intimidate Guyana and prevent it from renegotiating the Stabroek PSA. Hopefully, Guyana will forge ahead and negotiate an equitable contract for the benefit of the Guyanese citizens.
Nevertheless, oil is not Guyana’s only emerging resource as it is exploring water hydropower projects once again.
The PPP previously championed the Amalia Falls as part of its hydro energy mix. The project ceased when the APNU-AFC won the election in 2015. Now that the PPP is back in office, Vice President Jagdeo has clarified that the Amalia Falls hydro project and other waterfall projects will be reviewed for feasibility.
If successful, the Amalia Falls project would result in the first and only indigenous community (Kato) to be powered by 100% renewable energy.
Altogether, Guyana is encouraged to renegotiate the Stabroek PSA with Exxon in order to receive fair terms that were precluded at the time of signing. Guyana should not succumb to pressure from the oil magnate as it could receive terms in accord with industry standards or explore its renewable hydro energy projects instead.
Melissa D. Goolsarran Ramnauth, Esq. is a civil transaction/litigation and bankruptcy attorney. She graduated magna cum laude from the University of Miami with a Bachelor of Arts degree in Political Science, a minor degree in History that focused on the slavery and indentured servitude eras, a minor degree in Criminology, and a Juris Doctor degree.
MDGR Law, P.A.
Primary Sources: Stabroek News & Global Witness.