By Dr. Jerry Jailall
Head of the Media Unit ,OGGN
Oil and Gas Governance Network (OGGN) (www.oggn.org), formed in the summer of 2017, is an advocate and voice for a better deal for Guyana through the renegotiation of the current oil contracts, which have given away the national patrimony. In our view, the number one issue for Guyana is to do all it takes to invite the oil companies to the table to review the current Production Sharing Agreement (PSA) for the lucrative Stabroek Oil Block with a projected 10 billion barrels of known oil, and an ever-increasing quantity as more and more wells are drilled.
While rewarding the investors for their efforts, Guyana’s natural resources should benefit Guyanese first and foremost in national income, and jobs for Guyanese companies and citizens. The time for the working poor – the downtrodden masses of Guyana to benefit is now! Our people cannot wait.
OGGN’S REASONS WHY THE STABROEK OIL BLOCK CONTRACT SHOULD BE RENEGOTIATED
- The contract was signed with shell companies registered in the Caribbean. If there was a major oil spill, similar to what happened in the Gulf of Mexico, it would bankrupt Guyana. That spill cost BP about US$62 billion. This is not conjecture as it was reported in the media that in the Kanuku Oil block we barely avoided a massive BP type oil spill. We need to have the parents of the oil companies take on the insurance liability for an oil spill.
- The highly respected international non-profit, Global Witness, showed Guyana loses US$55 billion on 8 billion barrels when oil is at US$65/barrel in the current unfair deal. Since the Global Witness report was published in early 2020 the number of barrels of oil has been projected at 10 billion barrels. With Brent Crude hovering around US$80/barrel, using a similar calculation to Global Witness, and factoring this updated information Guyana loses US$91 billion dollars. About 41% of the 780,000 Guyanese live on US$5.50 or less a day. The country runs on about US$2 billion a year. This US$91 billion can ensure they have a decent meal daily and more.
- Guyana is paying taxes on behalf of the oil companies. Our citizens paid taxes to help build the roads and airports that the oil companies use to conduct their business. Our government should not be writing tax receipts for taxes NOT paid. These tax receipts can potentially be used to obtain a tax refund from the IRS. We demand the oil companies pay 25% taxes as per our laws.
- In the 1999 Stabroek contract, a key law was broken with the award of the 600 blocks when the maximum award for any single license should be 60 blocks. This is stated in the 1986 Petroleum Act, regulation 13(2). That Act makes reference to a graticular block, a unit of area of the seabed. The Act states the maximum allowed for a single license is 60 blocks but for the Stabroek block, the then Government gave away 10 times that amount for a single license. We need to enforce our laws.
- Because of a lack of ring fencing, which ensures oil well expenses don’t spill over to other wells, we may never see the expenses for the first project of Stabroek Block, Liza 1, fall below 75%. The reason why is the first 3 projects out of 20 potential projects in the Stabroek Block have infrastructure expenses totaling US$18.5 billion. The Liza 1 project won’t be able to pay off the debt that has accumulated, as part of capital costs, for the Stabroek block. Thus, the maximum we could get from Liza 1 is about 14.5%. The average worldwide government take is 69% from an IMF analysis of 67 oil regimes. We cannot be off the chart with a 14.5% take from Liza 1.
- The Stability Clause in the contract that prevents Guyana from renegotiating a fair deal is unconstitutional. Clause 32 of the contract is ultra vires, unconstitutional, undemocratic, and is contrary to Article 65(1) of the Constitution of Guyana by purporting to bind subsequent Parliaments under Clause 32.4 of the 2016 agreement. We cannot be violating our own constitution.