Exxon pressured gov’t for speedy signing of 2016 pact

- Cabinet-sanctioned report

A Cabinet-sanctioned review of the circumstances leading to the signing of a new Petroleum Agreement with ExxonMobil’s subsidiary Esso Exploration and Production Guyana Limited (EEPGL) in 2016 has concluded that the agreement was negotiated and executed in accordance with the law though a lot of pressure was placed on government for a speedy signing prior to the scale of the “world class” Liza-2 discovery becoming fully known and understood.

“Overall, the 2016 Agreement contained some improvements in comparison with the 1999 Agreement. The Contractor Consortium was not receptive to any changes and fought hard to retain the same terms as in the 1999 Agreement. There were also changes that were of benefit to the Contractor Consortium,” the review, undertaken by the United Kingdom-based law firm Clyde and Company and paid for by the Government of Guyana, stated. The Contractor Consortium refers to EEGPL, Hess Guyana Exploration Ltd and CNOOC Nexen Petroleum Guyana Limited, the partners in the 26,800 square kilometres Stabroek Block.

“The Contractor Consortium appears to have put a lot of pressure on the Government and the MoNR [Ministry of Natural Resources] to secure the 2016 Agreement in a short time scale,” said the report, dated 30 January 2020.

“The reason given related to commitments for drilling rigs that the Contractor Consortium said would need to be stepped away from if a new agreement was not signed. It seems to us likely that EEPGL were also strongly driving to have a new agreement signed prior to the Liza-2 well results becoming fully known and understood by the Government. Presumably because knowledge of a “world class” discovery could have altered the Government’s negotiating position,” it added.

Questions have been raised as to why Guyana had not awaited the results of the Liza-2 drilling before signing off on the 2016 agreement.

EEPGL holds 45% interest in the 6.6 million acre-Stabroek Block, while Hess has 30% and CNOOC holds the remaining 25%. The 2016 agreement has been the subject of controversy as some have argued that a better deal could have been negotiated as a significant oil discovery had already been made. Recently, anti-corruption watchdog Global Witness said that inept negotiation of the 2016 Production Sharing Agreement (PSA) could have cost the country as much as US$55 billion.

The PSA between Guyana and the Stabroek Block co-venturers states that up to 75% of the revenue earned from production could be used for expenses and to recover the companies’ investment (estimated at one point to stand at US$5 billion by 2020), while the remaining 25% – profit oil – is to be split evenly between them and Guyana.

The 35-page report, seen by the Stabroek News, was released on various social media sites minus the annexes that it used as reference and which include vital information needed for independent analysis.

A statement on Clyde and Company’s website said that the firm was retained in September 2019 by the Government of Guyana to “conduct an independent investigation, and prepare a detailed assessment, of the process which led to the signing of the new agreement in June 2016.” On 30 January 2020, the firm said, it concluded its investigation and submitted an independent report on its findings to the government.

Government was up to press time mum on the reason it paid for the report and why it did not make public that it had done so. Several efforts by Stabroek News to contact Director General of the Ministry of the Presidency Joseph Harmon and Department of Energy Director Dr Mark Bynoe proved futile.

Change in approach

The report, through providing a timeline of events, focuses primarily on the role of the MoNR during