Wall Street Journal Article Highlights Challenges for Guyana Following First Oil
March 15, 2019 – Georgetown, Guyana – A Wall Street Journal article published February 28th recounts the terms negotiated between Guyana and ExxonMobil Corp.
As global committees and commentators discuss the deal negotiated by Guyana and ExxonMobil Corp. – the oil company at the heart of the offshore discovery – Guyanese people look to the future with anticipation and hope. For Guyana, the dawn of First Oil has largely been met with celebration. President David Granger declared a new holiday – National Petroleum Day – to mark the December 20th event.
Guyana will go from one of Latin America’s poorest countries, second only to Bolivia, to undisputedly its richest. The deal with Exxon Mobil will provide Guyana with nearly $170 billion USD in revenue over the coming years. For a country with a current annual budget of just $1.4 Billion USD, the shift will be seismic.
And yet, despite the incoming influx of wealth for the country, there are some around the world who believe the 2016 deal negotiated by Guyanese Resources Minister Raphael Trotman could have played out differently.
Trotman, the principle Guyanese negotiator for the deal with Exxon Mobil (which was originally negotiated in 1999), renegotiated the deal in June 2016, keeping the 50-50 production sharing agreement from 1999 in place – after Exxon takes 75% of annual output to recoup initial investments – but increasing Guyana’s royalty from the originally agreed 1% to a new 2%. The newly negotiated deal also included a signing bonus of $18 million.
Three days after this deal was signed, Exxon announced a second exploratory well and increased recoverable reserve estimates to 1.4 billion barrels.
ExxonMobil defends the deal as fair for a first-time oil producer. There had been over 40 wells drilled offshore without success.
Global Witness, a London-based watchdog group that exposes resource exploitation in poor countries, believes the deal will pay Guyana some $55 billion below market value for its resources over the next 30 years. The watchdog claims to be bipartisan, despite skepticism amongst Guyana’s Cabinet that the report was released suspiciously close to the March 2nd election date.
President Granger is quoted as saying “It is time that the people of Guyana enjoy the right to self-determination and their own destiny without interference of foreign influences”.
Clyde & Co., a UK-based law firm hired by Trotman and Guyana’s Resources Ministry to examine the circumstances leading to the 2016 deal – and events shortly afterwards – found that Exxon had applied pressure to Guyanese officials to sign a deal in a shorter time frame, “presumably because knowledge of a ‘world class’ discovery would have altered the government’s negotiating position.”
Principle amongst the concerns of many in Guyana is the involvement of Venezuela and Suriname. Previous moves by both neighboring countries caused delays in exploration in 2014, resulting in Exxon’s original partner, Royal Dutch Shell PLC., pulling out of the deal and selling shares therein for $1. Getting to a deal quickly was believed by many to be necessary in the face of maritime boundary disputes raised by Venezuela.
Trotman remains hopeful; “I am a man of great faith and I believe it’s going to be a true blessing for Guyana. I expect it will bring us closer together.”
Speaking to the complex situation, TOTALTEC CEO Lars Mangal noted
“There will always be 2 sides to a situation like this, and not surprisingly, those sides are along the lines of the opposing political parties. You have to think about the macro and maximizing your potential as early as possible.” He continued, “This is a 100+ year resource. Learn the lessons of today and apply them in agreements going forward. The time now is to ensure this new resource delivers for the Guyanese people.”
An important part of that benefit for Guyanese is through careers in oil & gas, and the improved standard of living that comes with those.
Said International Petroleum and Maritime Academy (IPMA) Manager Kevin Delgarno,
“We have trained over 300 Guyanese men and women at the Academy, and we continue to expand our courses as the industry advances. Quality jobs will ensure these industry pioneers and their families will enjoy the coming new infrastructure, improved education systems and public services well into the future.”
TOTALTEC Oilfield Services is focused on the success of the oil industry in Guyana for the benefit of the country, its people, and partner companies. It does this through three areas: people, partnerships, and facilities. Qualified and motivated Guyanese develop through the International Petroleum & Maritime Academy. Partnerships prioritize products and services that are starting points to grow from, creating new Guyanese led companies. Examples are Guyana Shore Base, Inc. providing support to offshore operations and Jaguar Oilfield Services offering a complete range of lifting equipment and inspection services. The 94% Guyanese TOTALTEC workforce includes 8 nationalities with over 160 years of international oilfield experience. https://www.totaltec-os.com