Outgoing US ambassador justifies Guyana’s oil deal with ExxonMobil

Outgoing US ambassador to Guyana, Perry Holloway has defended that the 2016 production sharing agreement (PSA) with ExxonMobil, saying that it is a good deal. In his last sit down with media workers Tuesday at the Duke and Young Street embassy, the ambassador was asked about the controversial agreement, which was heavily criticized. According to the agreement, Guyana gets two percent royalty on every barrel sold with a 50/50 share on profits.

However, commentators, pointing to the track record of ExxonMobil, were fearful that Guyana was getting the `short end of the stick’ as the oil company and its partners have to first recover its costs, seriously eating into that 50/50 arrangement. How those costs are being claimed and determined is what is the subject of debate. According to Holloway, a 58-year-old diplomat who commissioned the Drug Enforcement Administration (DEA) in 2016, with every deal negotiated, one can get a little more with little on others.

He noted that earlier this year, he had pointed out that at the time when it was signed, in 1999, the agreement was a great one for Guyana. No one had the money to do it. Guyana had no track record.

The ambassador also said that he has also pointed out that there is a lot of misunderstanding of the contract. It is a hybrid contract- one that involves royalties and a profit sharing.

However, it is commonly analysed as only a royalty one.

When it is done that way, it “is a bad deal”.

The ambassador, who leaves tomorrow, stressed that combined, it is a good deal. It was also pointed out that it is difficult to determine an exact percentage of what Guyana will be getting as factors of oil price have to be taken into account.

In the case of the arrangements, ExxonMobil is putting up the money for the investments while Guyana is getting monies from day one of production. According to Holloway, Guyana will always “get more” than ExxonMobil. In that case, it is hard to argue that it is a bad deal.

The ambassador also warned that it is not advisable that attempts are made to continuously renegotiate contracts as it can scare investments.

He said “sure”, Guyana could have gotten a better deal.

However, on the same breath, there are countries where it could be found that a better deal was had while for others, it was a worse one.

(Kaieteur News)