International experts to assist Guyana with review of ExxonMobil’s deal
ExxonMobil’s Production Sharing Agreement (PSA) for the Stabroek Block comes up for renewal next year October and Energy Department Head, Dr Mark Bynoe, has assured that Guyana will have the requisite help to assist it when that time comes.
The official disclosed this following queries from Kaieteur News about the need for a specialist team, especially when one considers the weaknesses of the current PSA.
In this regard, Dr Bynoe articulated that the Department is quite aware that it does not have all the resources contained therein. “And so whatever we do as we have been on record as saying, we seek to hire in third parties to assist us as we build up that national capacity and that modus operandi is not likely to change”, the Energy Department Head added. Since the release of the Guyana-ExxonMobil contract, many industry analysts have said that there are numerous weaknesses, which Guyana should address at the earliest opportunity, with the renewal period for the deal being one of them.
The paltry two percent royalty is just one of the many provisions considered by industry analysts to be abnormal and in urgent need of regularisation.
Specifically, University of Houston Instructor, Tom Mitro, recently pointed out to absurd provisions which allow expatriates and subcontractors’ salaries or income to not be subject to tax. The Petroleum Consultant noted that under Section 15.12 of the PSA, expatriates’ salaries are not subject to Income tax if they don’t spend more than 183 days in a country.
Mitro said that this is an old trick in the book as the company simply gets many expatriates to be in rotation to avoid going over the 183 days. The Consultant stressed that most countries have plugged this tax avoidance loophole that companies have been abusing while noting that Guyana should too in all of the existing PSAs.
With respect to subcontractors’ income, Mitro highlighted that Section 15.10 of the PSA allows for it to be exempted from Corporate Income tax during the exploration period. The Consultant categorically stated that this is somewhat bizarre and should be corrected in Guyana’s model PSA.
Mitro had also told Kaieteur News that many countries have recognised how much they are losing in this regard and are already imposing the tax. He recommended that Guyana does the same. Other issues Mitro said must be corrected include paying the contractor’s income tax out of the country’s share of profits, rectifying the unusually large size of the blocks, upgrading the work obligations contractors have to meet as licensed holders, increasing the size of signing bonuses, implementing ring-fencing provisions to prevent costs of unsuccessful wells being carried over to that of successful wells, removing clauses which allow insurance premiums to be recoverable, and removing the troubling provision that allows the operators to fully recover interest and financing costs.
(Kaieteur News)