AFC now admits “imperfections” in oil contract signed by Raphael Trotman

The Alliance For Change (AFC) – the minority party in the coalition – has admitted that it was trying to secure the contract with oil giant ExxonMobil to kick off operations offshore Guyana, but in fast-tracking that process, there were several loopholes in that contract which was signed by its executive member Raphael Trotman.
This admission was made by AFC Leader, Khemraj Ramjattan, who served as First Vice President and Public Security Minister under the previous APNU/AFC Administration that signed Guyana’s oil contract in October 2016.

Ramjattan, during a press conference on Friday, noted that there was hardly anything the then coalition Administration could have done regarding the first contract that would not have been criticised.
“We had to ensure that we sign up as quickly as possible, as decisively as possible… so that the journey could be travelled having signed on at early date in 2016 for a Production Sharing Agreement. We knew that it would have imperfections about it and I am now making the criticisms… because we have learnt from that,” Ramjattan stated.

In the Production Sharing Agreement (PSA) with ExxonMobil, Guyana is only entitled to two per cent royalty and 50 per cent profit oil.
However, the coalition-administered agreement has been heavily criticised for its low royalty, lack of ring-fencing provisions and cost oil claims that industry experts say will see Guyana losing billions, among other issues.

In fact, in a report by non-profit Global Witness published in February 2020 titled “Signed Away”, it was noted that a new OpenOil analysis shows that Guyana forfeited some $55 billion in what has been described as the “lopsided” 2016 oil deal.

According to key findings of the report, “To get its deal, Exxon employed aggressive and rushed negotiating tactics. At the same time, Guyana’s negotiators [APNU/AFC Government] were inexperienced, acted against expert advice, and underplayed Guyana’s strong bargaining position. One official – [former] Natural Resources Minister Raphael Trotman – even knew Exxon would soon announce the results of its new oil find, but rushed to sign Stabroek anyway, despite advice from experts to seek further information.”
It was noted that that find turned out to be one of the largest in the world in recent years.
Currently, the PPP/C Government is reviewing the contract for the Paraya project – Exxon’s third field development in the Stabroek Block, where in excess of 8 billion barrels of oil have been discovered since May 2015.

ExxonMobil affiliate, Esso Exploration and Production Guyana Limited, is the operator and holds 45 per cent interest in the Stabroek Block. Its partners, Hess Guyana Exploration Ltd, holds 30 per cent interest, and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds 25 per cent interest.

The review of the evaluation done by British firm Bayphase Limited on the Payara project Field Development Plan (FDP) is ongoing by a team of consultants led by former Alberta Premier Allison Redford.
As such, during Friday’s press conference, Ramjattan called on the new Administration to now ensure that it does not make the same mistakes with the Payara Development contract.

“Now if you’re going to sign on the Payara contract and there might have been lacuna, which did not explicitly state the positions in relation to Stabroek, you can be critical of us because it’s a learning curve. And is what happens when countries get first oil and start the industry. So, it is a little unfair to say because we kept our mouths shut and we started an agreement so that we could have oil today that has made the country far wealthier, that we should not be critical at moments like these when we could have a better deal for the Payara…” the AFC Leader asserted.

Payara, which was discovered in 2017, is Exxon’s third potential development project within the Stabroek Block after Liza Phase 1 and 2. The discovery well was drilled in a new reservoir, encountering more than 29 metres of high-quality oil-bearing sandstone reservoirs.
The Payara development plan includes a floating production, storage and offloading (FPSO) vessel, named Prosperity. It is expected to produce 220,000 barrels per day, supporting up to 45 wells, including production, water injection and gas injection wells.

Under the former APNU/AFC Government, the Energy Department contracted Bayphase to conduct a review of the FDP in December of 2019.
The review was completed but in the wake of the controversies that followed the March 2, 2020 elections, little progress was made on approving the plan. Exxon’s Final Investment Decision (FID) hinges on gaining approval for the development.
Exxon has complained that further delays in granting approval for the project could result in less revenue for Guyana after the project starts up in 2023.
In fact, Exxon Senior Vice President Neil Chapman had warned that if approval comes in later than September, weather conditions could affect operations.

But industry experts have argued that unless Exxon is able to give proper environmental and local content assurances and even improve the terms of its contract with Guyana, approval should be withheld.
Last year, ExxonMobil made five discoveries. These discoveries had pushed the total estimated recoverable barrels of oil equivalent to over six billion. It made one discovery for 2020, the Uaru discovery, which was announced in January. Uaru is ExxonMobil’s 16th oil discovery in the Stabroek Block.