Though the government maintains that the oil contract inked by the previous administration is poor and lopsided, President Dr. Irfaan Ali reiterated that the government will respect existing contracts.
At the sidelines of an event on Friday, the Head of State underscored that his administration will ensure that all future contracts are more acceptable.
“In the [elections] campaign, we acknowledged that this was a lopsided agreement, that the last government did a horrible job but we have to respect it.
“That is how the international world works…but we committed to ensuring that other blocks would not have the same PSA,” President Ali said.
Pressed if he was comfortable with maintaining the deficient contract, the President said that it is not that he is comfortable with it but the government maintains the sanctity of contracts.
His comments come days after Vice President Dr. Bharrat Jagdeo announced that a 10 per cent royalty and lower cost recovery are among the new terms for Production Sharing Agreements (PSAs) ahead of the highly anticipated bidding round for the remaining oil blocks.
During a recent media briefing, the Vice President said a 10 per cent royalty rate will head the new model agreement, up from the 2 per cent granted to ExxonMobil for its ongoing exploration and production in the Stabroek Block.
The 75 per cent cost recovery ceiling has been lowered to 65 per cent. The sharing of profits after cost recovery will remain 50/50 between the government and the contractor.
Additionally, a corporate tax of 10 per cent will be instituted, where there was none before.
In the wake of the Vice President’s announcement, members of the APNU+AFC opposition have called for the Stabroek PSA to be reviewed and improved.
Production has already started in that Block. Prolific exploration in that 6.6 million-acre area by ExxonMobil affiliate Esso Exploration and Production Guyana Limited (EEPGL), has so far led to multiple discoveries that could result in the production of 11 billion barrels of oil.
President Ali, however, reminded reporters that it was the APNU+AFC that inked that contract while in office. And so, he believes that their current calls are disingenuous.