Guyana Pre-Contract Costs & the need for Precogs

(Click on diagram to enlarge.)

 

From a farcical entrapment of the Government of Guyana into being liable for Pre-Contract Costs, outlined in the chart above; costs that under normal conditions are wholly the responsibility of the Contractor Partners in the 2016 Production Sharing Agreement re: Esson, Hess and Nexen.

I ask Ms. Kimberly Brassington’s replacement, Ms. Deedra Moe, Senior Director, Public and Government Affairs of ExxonMobil to enlighten the Guyanese people where in the world, Pre-Contract Costs have been assumed by or foisted on – the owner of the oil resource, by ExxonMobil.

The tragedy for Guyana is that the smoke and mirrors morass of us being unconscionably burdened with Pre-Contract costs, has created the tragicomedy of the Guyana Government having to audit costs that are not normally costs linked to the resource owner.

There is much more swamp we must slog through, to understand why accepting Pre-Contract Costs are the investments of the contractors and not the owner’s costs – re: Feasibility Study or Forefront Conceptual Study, Front End Engineering and Design, Final Investment Decision, Sourcing Financing (definitely at premium rates from companies controlled by ExxonMobil) and Engineering, Procurement & Construction; all components of Pre-Contract Costs.

It prepares the vanquished for all manner of contract abuse, which along with the unparalleled and incomparable two percent royalty, are the most egregious, abusive and immoral features of the 2016 Production Sharing Agreement, between the Government of Guyana and its “partners”: Esson, Hess and Nexen.

All these fungible and unlimited costs in the context of Pre-Contract Costs are passed onto Guyana, greatly reducing the benefits we will obtain from the oil find of the century in Guyana’s offshore. Why you ask? Business 101 – bonanza profits and dividends for ExxonMobil and its shareholders. Benefits to the people from the frontier country with more than ten billion barrels of oil; matters not a whit to most Global Oil Companies, including ExxonMobil, Hess and Nexen, as exemplified by the 2016 PSA.

Pre-Contract Costs have soared from Gy$99 Billion in 2016 to GY$215 Billion in 2018 and projected to GY$946,000,000,000 for the Liza 1 Project. How Guyana will ever get out of this octopus trap of a contract is via immediate renegotiation that is not swayed and bungled by partisan politics; instead, the renegotiation process should only be influenced by what is fair and just for Guyana. It is also distressingly painful to contemplate the Pre-Contract Costs that our “Partners” will force upon us for the other oil discoveries in Guyana’s offshore wells – re: Payara, Liza deep/2, Snoek, Turbot, Ranger and Pacora, Longtail-1 and Hammerhead.

What the people of Guyana need are precogs that were available and utilized in the Minority Report movie, where the precogs foreknowledge of crimes, was used to prevent crimes from taking place.

Thus, this fictional solution is as unactionable as the heavily alloyed Pre-Contract costs dumped on Guyana by our “partners”, consistent with trying to limit and remove whatever ExxonMobil conjures as Pre-Contract costs.

Guyana paying any monies for pre-contract costs is groundless, lacking justification and utterly foolish. Why must we go through this farce of Auditing expenditures that are solely those of Esson, Hess, and Nexen?

The royal contract screw-down, with the mindless two percent royalty contraction are repulsive. Pre-Contract Costs are not for Guyana to pay, much less audit.

Sincerely,

Nigel Hinds

Oct 7th, 2018