Every Man, Woman and Child in Guyana Must Become Oil-Minded – Part 86 – February 7, 2020
Introduction
It has been a week of fast-moving events. This past Monday (February 3), the London-based NGO Global Witness released a report Signed Away in which it made the claim that had Guyana properly negotiated the 2016 Petroleum Agreement with Esso/Hess/CNOOC Nexen, it would have received some US$55 billion more than what it would receive under the contract it now has. By a strange coincidence, a Government sponsored report by Clyde & Co, a law firm out of the UK, appeared in the electronic media despite having as its first words Strictly Private and Confidential.
The Government of Guyana went into overdrive, describing the Global Witness Report as “baseless”, “sensationalist, agenda-driven and extra-ordinarily speculative.” Criticisms came not only from the Government but from Forbes Magazine of the USA and Rystad Energy a research company from abroad and high profile local individuals such as Ms. Melinda Janki and Mr. Wesley Kirton. The comments from Forbes were logically understandable as it saw the report as an attack piece aimed at some of the biggest players in the oil and gas sector. Forbes saw it necessary to defend its friends in that sector.
Understanding numbers and projections
Rystad argued that its 2% royalty and 50% share of profit will give the Government 60% of the profit from Esso’s various projects. For her part, Melinda Janki in a letter in the Stabroek News accused Global Witness of putting out “Lala-land estimates”. I doubt that Ms. Janki was aware that accompanying Global Witness report was the extensive worksheets and report by Open Oil setting out the assumptions used in the projections – including from Rystad and the United States Government. While Rystad did not mention Global Witness in the press release it issued, it sought to counter pose Global Witness’ recommended 69% with its own strange math of 60%. If Rystad wants to be taken seriously and not another majority-of-65-is-35 type, it should make its methodology and assumptions public.
For his part, Kirton seemed to see the expressed concerns of GW as analogous to a marriage, and of course as arrogance and disrespect for us Guyanese. I wonder what he thinks of an ExxonMobil man Mr. Brook Harris writing the draft Cabinet paper justifying the give-away of the century to a foreign oil company on the 50th. Anniversary of Guyana’s Independence Day!
The Government had the upper hand: Exxon had the Government
I have read the Global Witness Report and the projections and long-term estimates by Open Oil. If I have any concern, it is that the estimate of US$55 billion is conservative and understated. It did not take any account of the abundance of gas and it used a median range of oil contracts for oil production which were negotiated before oil was found. Also omitted is that the Government has to pay the oil companies taxes for at least the next forty years from its share of oil profits. And significantly, by the time the 2016 Agreement was signed, there were two major world class finds and Exxon by its own admission was operating under an expired contract. The Government clearly had the upper hand. But Exxon had the Government. That was all that mattered.
Who paid Clyde?
Now for the Clyde & Company report paid for by taxpayers. Like the Escrow Letter under the Bridging Deed, there are a multitude of annexes which are missing, including the Engagement Letter setting out the terms of reference and fees payable to the legal firm. But the Clyde and Co report seems to have had as a principal objective clearing the name of Trotman who stands accused of the most costly act of incompetence ever perpetrated on the people of this country. Let us recall that by the time this report was commissioned in late 2019, oil and gas had been removed from Trotman’s portfolio. How he came to drive this Clyde process is quite a mystery.
Yet, Trotman was allowed to select the law firm and to decide who they could meet: only two ministers – himself and Greenidge. He also decided which documents he would share with the law firm. As the Report states at paragraph 1.6.2 the Report was prepared on the basis of information provided by Trotman’s Ministry and the GGMC over which he has portfolio responsibility. One of Greenidge’s signal contribution was to give to the oil companies the assurance that US$15 million of the Signature Bonus would only be used to fund the proceedings with Venezuela in the International Court of Justice. In other words, at a minimum, to protect Exxon’s assets.
While Trotman’s list of interviewees did not include the oil companies, their presence pervades the report. We learnt that they “appeared” to put a lot of pressure on the Government to secure the 2016 Agreement in a short time scale, with different reasons being offered by the oil companies. None of the reasons seemed to have convinced Clyde. It thought the real reason was because Exxon’s subsidiary was driving to have a new agreement before the Liza-2 well results became fully known.
“Arrogance and disrespect for us Guyanese”
The most important bit of information in the Report was the revelation that on the 25th. May 2016, exactly fifty years to the day since Independence, while we were celebrating 50, Brooke Harris of ExxonMobil “provided by email a first draft of the Cabinet Memorandum to Mrs. Homer (Mr. Trotman’s Legal Adviser)”. It did not stop there: Clyde states in its report that the Cabinet Memorandum was prepared along the lines of the Independence Day email and that draft versions were exchanged between Mrs. Homer and Mr. Harris right up to the 31st. May. It was submitted to Cabinet on June 3, the very next business day.
If ever Guyanese should be offended at – to borrow Wesley Kirton’s words – the arrogance and disrespect for us Guyanese, it is being told this by Clyde. Clyde also tells us that Trotman and Homer told their team that visited Guyana, that they received daily phone calls from the Contractor’s Consortium. And in the same Independence email, Harris told Mrs. Homer that Esso had strong operational need to have the section 51 Order (tax variation) confirmed.
Conclusion
This is the first time in two years in which more than one Column is published. It took a lot of effort to do three columns and I hope that Guyanese have a better understanding of the path down which the APNU+AFC has taken Guyana. One has to wonder why the Government did and continues to do so many things in secret. We must remember that these things were not expected to come to light – the signing bonus, the Agreement, the Bridging Deed, the Escrow Letter and now the Clyde Report. It is the height or depth of stupidity for the Government to have considered the Clyde Report as exculpatory. For the excerpts cited above, it is damning. Laziness, absence of patriotism and a frightening complex for foreigners, prevented the Government – including Granger – from doing basic reading.
The Government’s response to the Global Witness Report, its pattern of deceit and dissembling of facts, its obsequiousness to Esso in particular suggest that if by whatever means it remains in power, there is no hope of Guyana recovering from the infamous Contract, the product of a Cabinet Memorandum written by ExxonMobil. My hope is that the anger which the Bridging Deed revelation has aroused will be constructively managed and that Exxon will have been sufficiently exposed and embarrassed that it would voluntarily return to the bargaining table. I hope that I am not hoping in vain.
By Chris Ram
Article originally published at: https://www.chrisram.net/?p=2153
