GGMC team clinched Exxon pact –Trotman
-says gov’t satisfied with terms, IMF report to be addressed
Minister of Natural Resources, Raphael Trotman yesterday distanced himself from negotiating the modified ExxonMobil contract last year saying it was a team of professionals that conducted the discussions and even in hindsight his government is satisfied with the terms reached.
“I know there is a belief that Raphael Trotman sat in a room and negotiated this. I am a lawyer for 27 years standing, I have a Master’s Degree in which negotiations was one of the subjects I had to pass, I graduated with distinction and I have been trained as a negotiator and mediator by Harvard Law School, but I did not take it upon myself to do so,” Trotman said yesterday.
“The country in the past has relief on the technical staff of the GGMC…Mr Newell Dennison (Commissioner of GGMC) and his team were the principal negotiators (of the Exxon petroleum agreement),” he added.
The Minister of Natural Resources joined Minister of State Joseph Harmon at a post-Cabinet press conference yesterday at the Ministry of the Presidency where he answered questions on the controversial contract agreement signed with ExxonMobil last year. The agreement was released a day earlier at the same location in the presence of President David Granger
Trotman said that he never proposed to be the negotiator of the contract for this country because for him to feel he could have done it alone would have been “foolish”. However, during negotiations he “did have a say in terms of where are we” and he also reported to Cabinet from time to time.
“I also reported in parliament that government relied on advice from Michelet and Co. from Oslo, Norway, one of the leading law firms in Norway and a law firm for the Extractive Industries and Transparency Initiative. So this is no ordinary law firm, they give advice on the contract. So it was not a personal negotiating done by Raphael Trotman it was a team that was both national and international in its nature,” he stressed.
Trotman would not go into details about how the US$18M figure for the signature bonus was arrived at but said that knowledge that a bonus could be had from a contract was publicly known and was reinforced though international technical assistance this country had sought.
“I wouldn’t get into the amount. I believe that in parliament I did make some comments vis a vis the bonus and what government believed that it should be spent on. We took for precedence, what would have been spent on legal services in the past on matter of this nature at the international (law of the sea) tribunal and we may have added to that and a few other factors would have been taken into consideration before arriving at a figure. But certainly we used the precedent with the 2000 matter with Suriname,” he said.
“We used the 2012 base model and had it reviewed by an international firm,” he would later add.
He wanted to clear the air on critics who have piled criticisms on him for the reworked terms and agreements reached last year saying that he and his government believe that the modified contract was ample, taken all the mitigating circumstances into consideration.
“Insofar as our level of satisfaction, we are satisfied. There is no such thing as a perfect contract as any lawyer would tell you, each has to be looked at individually. Negotiations can take up to a year and can be costly and it is why we took a decision to have a marginal adjustment,” Trotman said.
“We use the 2012 model (petroleum) agreement which was done by GGMC and we built on that and as I said before there is no one person who sat with Exxon and tried to negotiate,” he added.
Modified
In the modified contract Guyana receives an $18M USD signature bonus, a US$760,000 increase per year in rental fees, from US$240,000 to US$1M, training funding increased from US$45,000 to US$300,000 per annum and a new allocation of US$300,000 for social and environmental programmes has been made. Government also boasted that it was able to introduce a two percent royalty on gross production.
For ExxonMobil, a tenyear agreement which was scheduled to be up in 2018 was extended and the tax regime remains the same as in 1999 where it would not pay VAT, excise tax or duties on its operations.
The company can also export all petroleum to which it is entitled free of any duty, tax or other financial impost and can receive and retain abroad all proceeds from the sale of such petroleum among
many other benefits.
An IMF team in a November 2017 report has said that ExxonMobil got a generous agreement from Guyana and that loopholes exist in the agreement which could see the country losing out on revenue.
Trotman maintains that the benefits derived through the new negotiations were fair but both he and the Minister of State said that the IMF report would be used and recommendations would be relied on as government makes future decisions.
“As I said there is no such thing as a perfect contract. In 2013 Venezuela chased away (US oil company) Anadarko (from Guyana’s waters) . Exxon is the only company that showed the courage to explore in the waters so there were some concessions to give. It is almost difficult to even to put a dollar value to have an international company develop our resource. From the time I was small I heard that Guyana has potential. It is time that we feel and hold that potential. This is the only company that has been brave enough to venture with the partner and people of Guyana and yes we have to give some concessions to them,” Trotman said.
And like countries that have limited capacity to deal with specific negotiations and issues, he said that Guyana has followed suit and “this is what we have done” pointing out that it was government which asked the IMF to compile the report on petroleum taxation and revenue management.
“We have turned to the best financial experts in the world, that is what we are doing,” he said while noting that it was a work in progress.
He said that he understands that watchdog organizations and critics would comment on developments on various issues and those are welcomed here as “It is the job and views of the people to criticise”.
Reputable
However, as it pertains to the agreement with ExxonMobil, Trotman said that the positives must be looked at and government is pleased that it has secured a deal with a large and reputable company that has anchored interests and will not abandon this country while simultaneously generating needed revenue.
“It is important that we surround ourselves with one major company and then develop other relationships. But it is important that we don’t try to play the field as some bachelors try to do. We should have a civil relationship with one, anchor ourselves with one, develop our relationships with one and if others come we will be able to better get better terms than with Exxon. It is difficult to put a dollar value to the value of Exxon. No other company has been able to say they will stay here. So we are satisfied despite what the critics may say,” he said.
But other companies preparing to explore here must prepare for intense negotiating as Trotman said “what Exxon enjoys others are not going to enjoy” and even Exxon if they wished to start exploration at another block will see different terms and conditions. “If Exxon wishes to have a contract for another block it will be different,” he added.
On the background of government first saying that the non-disclosure of the contract was because of security reasons coupled with Minister of Foreign Affairs Carl Greenidge admitting that he advised on same because of the current border controversy with Venezuela, Trotman said he still believes that this country has to be cautious in terms of security.
“When you live in a neighbourhood where you live in a small wooden house and your neighbour lives in a huge mansion and you discover a diamond in your backyard, do you run around your yard with the diamond in hand shouting knowing that your neighbour has already laid claim to your backyard? You have to protect what you have and be careful not be running around showing off ‘this is what we have’ when your neighbour has already said the backyard is mine. You don’t run around in your shorts beating your chest saying ‘This is what I have’ because he will come and take it from you. So we have to be careful with what we do. Here we are, less than a million people, with a reserve that is more than Trinidad and Tobago which is more than many oil producing countries in the world, we don’t have a standing military that can withstand much, we don’t have a navy or air force. Diplomacy and legal acumen has always been the tip of the spear for us and that is where we need to put our emphasis and safeguard what we have,” he posited.
“We are heading to production and between today’s date and production in 2020 much is going to happen, much can be expected to happen, much has to be prepared for and much will have to be done to protect the sovereignty and resources of Guyana. You are going to see other countries who will be upset… there is something known as envy, theft…our national security is a matter of important to us,” he added.