Faced with mounting criticisms of the petroleum agreement signed with U.S. oil major ExxonMobil and its partners to develop the giant oil fields offshore Guyana, Minister Raphael Trotman Wednesday said: “all terms” of the contract could be reviewed.
The June 27, 2016 petroleum agreement, which went into effect on October 7, 2016, states that the prospecting licence is for a four-year period and the end of that initial period, “the contractor shall elect either to relinquish the entire contract area or renew the Petroleum Prospecting Licence for a further period of up to three years.”
“All of (the) terms will be up for review at that time,” Trotman said when asked if the Government would be willing to review the contract after the initial four-year period.
“If the opportunity for a review presents itself as per contract, naturally the Government will look to review.
“We would have by then had a chance to see how it is operationalised; we would have been producing, so there are a number of things to look at,” he told reporters on the sidelines of an event at the Civil Defence Commission in Georgetown.
Trotman said that the current contract with ExxonMobil and its partners provides a “good opportunity” for Guyana to fashion future such agreements to “different terms” because the Guyana would have “different realities.”
The petroleum agreement provides for two three-year renewal periods.
Regarding the Stabroek Block – a concession of hundreds of oil blocks – Trotman said that the Government has no intention of varying that.
The Stabroek Block is 6.6 million acres and spans the two extremes of the country’s borders.
He said that in 1999 when the Guyana government, under then President Janet Jagan, made an agreement, the size of the concession was determined “strategically” and the present government saw the wisdom in not interfering with the size of the block, nor does not intend to do so in the future.
Trotman added that the Minister responsible for the sector has the authority under law to vary the sizes of the oil blocks.
He said that just a “few” oil blocks remain; the Government is yet to decide how it will distribute that and to whom.
Trotman said that with ExxonMobil gearing up for oil production in the next two years, his preeminent concern is how Guyana will spend the oil revenues.
“…we were going through the financials with the IMF only last week,” Trotman said, and “we’re going to be earning billions of dollars.
“I think the more important question is what do we do with what we are going to earn and how do we prepare for future generations – schooling, healthcare, roads, bridges, opening up our country.”
From the Liza-1 well which is projected to begin production of 120, 000 barrels of oil per day in 2020, ExxonMobil had estimated revenues for Guyana to be over US$1.5 billion after five years production if oil is at US$50 per barrel. This was calculated taken into account a 2% royalty and 50% profits after production costs are recovered.
On signing the contract, Guyana agreed to receive a US$18 million signing bonus, an annual rental fee of US$1 million, a training grant of US$300, 000 a year and another US$300, 000 annually as corporate social responsibility/environmental support.