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Support for President Ali on Payara review
There is much support for President Ali in the diaspora on the review of the Payara FDP and for renegotiation of the oil contract.
However, it is very difficult, though not impossible, to break a contract with a multinational corporation (MNC). Breaking a contract is fraught with serious consequences, some of which are geo-political. Anyone who has studied political science would know how MNCs shape domestic politics, and one has to have a balanced relationship with them.
Nevertheless, Government must attempt to seek some kind of additional benefits for Guyana, and certainly enforcement of, as well as variation in, local content agreements. It requires best negotiation skills and strategies to get Exxon to give more benefits to Guyana without actually billing Guyana for them. Guyana is today the most profitable asset Exxon has. It has been dumping various assets around the globe but retaining Guyana’s, which is described as “new frontier”.
In fact, Exxon has been de-listed on the NY Stock Exchange. Guyana is its saving grace for now; the best deal Exxon ever got globally on making money.
The least that President Ali can do is to review Payara and reset it. People must put aside all the bad press and innuendoes and allow the Government to proceed with the completion of the review of the FDP. It is only fair that a new Government be given some leeway over the review and its negotiations with Exxon. Suggestions can be made to reset the agreement.
The Government is looking at the bigger picture, the long-term future of the oil industry, in seeking a review. It will set the model for future reviews of FDPs, and there may be another dozen over the next 30 years, the term of life of oil extraction. Review of Payara gives Government an opportunity to set its own standards based on world recognized best practices on FDP, and the Government will not disappoint.
While Payara FDP is being reviewed as committed, the Government has no choice in the selection of the reviewer. The Canadian donor selects the reviewer, which is led by Ms Allison Redford and comprises Guyanese-Canadians as well.
Payara is a complicated project. I can’t imagine Redford would rubberstamp things; I expect a professional review. Further independent review of the FDP can and should be undertaken by the Government to the satisfaction of critics, in order to maximise benefits to Guyana.
As revealed, Bayphase did the technical review of the Payara FDP for the Granger Administration, and the Redford Team is conducting a review of the FDP. As reported, the Redford Team is reviewing the methodology used in the FDP. When completed, it is hoped that it would be a framework for future negotiation – creating a model that would work for Guyana and perhaps other countries in similar predicament as Guyana.
Contrary to what is rumoured, there is no conflict of interest between the Redford Team and Exxon. It is noted that the lawyers retained by the preceding Government for the Production Sharing Agreement (PSA) and preparation of earlier FDPs were blatantly conflicted with Exxon. They were lobbyists for Exxon; that in and of itself raises legal questions about the contract. The lawyers failed the preceding Guyana Government in oversight role. Its report is due by weekend.
The emphasis on Payara review is not on PSA, but on issues pertaining to the environment and role of local stakeholders in supplying materials and resources and providing service to Exxon. So far, under the previous regime, Guyanese have minimal role in local content, other than supplying bhajji and bora. The last Government did not listen to public views on local content.
The Ali Administration is listening. The PSA concluded by the Granger Administration in 2016 is lopsided in favour of Exxon. The Government had an opportunity to negotiate a fair contract (with higher royalty and profit-sharing), but failed in that mission. We read that it refused sound advice, and that the negotiator, Minister Trotman, was instructed to sign the contract. Who instructed him to sign the contract we don’t know, and he won’t reveal the name/names.
Was the Exxon contract negotiated in good faith? Did the Government send a competent team to do the negotiation? Was independent technical advice proffered? Trotman should not have negotiated and/or signed the contract, unless it was reviewed by experts acting on behalf of the interests of the nation. He said he didn’t read it; he should have. One cannot enter into a contract without reading it. Why wasn’t it read?
It was irresponsible behaviour not to have read the contract, he was acting in the nation’s interest. Was he forced to sign it? And if so, by whom? Somebody or some bodies, not the Ali Administration, must be held accountable for this PSA and the conflict of interest associated with it. The Ali Government has to honour the contract, unless it can legally be shown to be unfair and Exxon was at fault. One has to make a strong, legal case for renegotiation. The Exxon contract was negotiated and signed in the US, so an American court has jurisdiction.
President Ali has acted wisely to recover an unjust situation on oil development. He deserves support for his present course of action.