Jagdeo says ‘no changing of fiscal terms’ in new oil contract

The government has received a number of responses from oil companies to its draft model Production Sharing Agreements (PSA) and Vice President, Dr. Bharrat Jagdeo, on Thursday said that although there has been some push back to the fiscal terms, the government will not alter them.

“We are not changing the fiscal terms.

“They will have to live with those terms,” said Jagdeo who had long championed more benefits for Guyanese in future oil contracts.

During a press conference last week, President of ExxonMobil Guyana, Alistair Routledge said ExxonMobil was not happy with all aspects of the draft model agreement.

“We provided quite a significant feedback to the government…there had been a lot of changes verses the current PSA.

“I would not say that I’m comfortable to sign as it was in the first draft,” Routledge said.

He did not reveal ExxonMobil’s specific objections. ExxonMobil is the beneficiary of the first oil contract signed under the former APNU+AFC government that many have argued is lopsided and had lobbied for a re-negotiation.

The current government had said it is bound to honour the contract as is but as it relates to new licenses for future exploration, the government is looking to have oil companies sign onto a new contract – the draft for which is already available.

And Jagdeo maintained that the final agreement will see the same fiscal terms as the draft.

A 10% royalty rate heads the new model agreement, an increase from the 2% granted to ExxonMobil for its ongoing exploration and production in the Stabroek Block.

The 75% cost recovery ceiling has been lowered to 65%. The sharing of profits after cost recovery will remain 50/50 between the government and the contractor. Additionally, a corporate tax of 10% will be instituted, where there was none before.

Dr. Jagdeo previously explained that while the old terms granted the government a 14.5% share at the start of production, the new terms will increase this to 27.5% along with a corporate tax.

These terms will apply for the current auction and will also be imposed on any current contracts outside of the Stabroek Block if a discovery is made and moves to production.

ExxonMobil and other companies participating in the current auction for 14 new oil blocks will have to sign onto the terms of the new model PSAs.

The government has also rejected a request from some Indian companies for a discount on the freight should a future agreement be reached for the sale of Guyana’s crude to India.