The 2016 Petroleum Agreement Compared – Tough Terms

been amended. In 19.2 of the 1999 Agreement, the Contractor was required to employ to the maximum extent possible, employ, and encourage Sub-Contractors to employ Guyanese citizens having appropriate qualifications and experience. The words “maximum extent possible” have, rather unfortunately, been deleted while instead of encourage, the Contractor is required to “contractually obligate” sub-Contractors to hire appropriately qualified Guyanese.

Article 19.3 of the 1999 Agreement required payments ranging from US$30,000 to US$45,000 during each of the two phases of the Initial, First and Second Renewals to be applied to designated purposes. That sum has now been increased to US$300,000 annually to be paid “directly into bank accounts held and controlled by the Government.”

The use to which this money can be put as set out in the Agreement are: (a) to provide Guyanese personnel nominated by the Government with on-the-job training in Contractor’s operations in Guyana and overseas and/or practical training at institutions abroad; (b) to send qualified Guyanese personnel selected by the Government on courses not exceeding one year at universities, colleges or other training institutions; (c) to send Guyanese personnel selected by the Government to conferences and seminars related to the petroleum industry; and (d) to purchase for the Government advanced technical books, professional publications, scientific instruments or other equipment required by the Government.

It seems rather embarrassing for a Minister of the Guyana Government to repeat in the 2016 Agreement the stipulation that the Contractor will provide funds to a sovereign Government to buy technical books for the Government! Clearly mendicancy is firmly planted in our emerging petroleum sector. It also seems a paltry sum to pay for courses in training at universities and colleges y and fees, on the job training abroad and to send officials to conferences and seminars.

A new Article 19.4 requires the Contractor and the Minister to provide, within sixty days of a new year, a yearly plan for the utilisation of qualified Guyanese personnel for the upcoming year. In what appears to be a cut and paste job, the Minister and the Contractor will meet and consider the effectiveness of their plan, while the Contractor is required to submit half-yearly reports on how their plans are working out.

(Free) Assets and Insurance

Next for consideration is Article 20 – Rights to Assets and Insurance which earlier this week generated a statement by Trotman’s Ministry after the Kaieteur News ran a piece on the new Annexure 4 to the Agreement. Article 20.1 (b) provides that subject to a number of exceptions which the Ministry’s statement conveniently ignored, the Contractor will deliver to the Minister free of charge “installations, works, pipelines, pumps, casings, tubings, engines and other equipment, machinery or assets of a fixed or permanent nature constructed, used or employed by the Contractor or the Operator in the Contract Area”, and any fixed assets outside the Contract Area, and any movable assets of the Contractor or Operator used in connection with Petroleum Operations and located in Guyana, for which the costs have been fully depreciated.

In the case of assets which have not been fully depreciated, Government will pay for those assets at a price equivalent to their unrecovered cost, i.e., cost less any wear and tear allowances. The delivery and or sale referred to above does not include assets which the Contractor or Operator requires for other areas, rented or leased assets, assets owned by sub-Contractors, household goods and vehicles and equipment and other assets not owned by the Contractor or Operator.

It is not clear why Trotman is so excited by these provisions – they were in the Janet Jagan’s 1999 Agreement. If they are so good and beneficial, the proper thing to do would be to give some credit to the late President. If Trotman actually read both the 1999 and the 2016 Agreement, his pronouncements would make some sense. It is frightening that he may not have done so which would at least explain some of his more uninformed comments and statements.

To be continued