A natural-resource watchdog group alleges in a new report that Guyana may have lost as much as $55 billion in potential revenue by poorly negotiating a deal with ExxonMobil to pump reserves that are expected to make the small South American country into the world's newest major oil producer.
London- and Washington-based Global Witness says in the report released Monday that the 2016 deal giving Guyana 52% of the revenue from oil pumped from a big offshore oil block was far better for ExxonMobil than Guyana because such deals typically give national governments 65% to 85% of revenues.
Guyana had a strong bargaining position when the contract came up for renegotiation because Exxon had just made a giant offshore oil discovery, but "inexperienced" bureaucrats failed to press for substantially better fiscal terms, the report said.
Government officials were more concerned with a maritime border dispute with Venezuela than negotiating better terms, the group said. Natural Resources Minister Raphael Trotman signed an "exceptionally bad" deal compared with other frontier oil nations, Global Witness said, citing a fiscal analysis by OpenOil, a Berlin-based public-policy researcher.
"A country with inadequate schools, a declining sugar industry, and crumbling sea defenses that cannot protect it from rising sea levels deserves a better deal," the group says.
Trotman declined to comment beyond previous statements in which he said it was in Guyana's best interests to gain "security in what it had" rather than engage in a protracted renegotiation.
ExxonMobil said the report failed to account for the risk the oil giant assumed in exploring the unproven deep water area known as Stabroek.
"The conclusions drawn are based on hypotheticals and circular reasoning that do not take into consideration Guyana's status as a frontier hydrocarbon province," the company said Monday. Exxon said Global Witness's conclusions are "misleading." The group compared Guyana to mature oil-producing countries that have lower-risk profiles and failed to acknowledge that the "material economic terms were agreed to in 1999 and remained in effect in 2016," the Irving, Texas-based company said.
Even for a company the size of Exxon, Guyana is becoming a critical project. Under pressure from investors upset by its poor, long-term stock performance, Chief Executive Officer Darren Woods last week championed the project's high returns as an example of the fruits of his $35 billion-a-year spending plan.
ExxonMobil began shipping the first tankers of Guyanese oil this year and the offshore fields are estimated to contain more than 8 billion barrels, one of the world's largest reserves. The revenue is expected to transform the finances of Guyana by generating an estimated $168 billion over the life of the project, 120 times the country's annual budget.
Global Witness said it had found no evidence of corruption in Guyana's deal with ExxonMobil, but called for closer scrutiny of the relationship between Trotman and Nigel Hughes, who has worked as a lawyer for ExxonMobil.
Trotman and Hughes are leaders of a Guyanese political party, Alliance for Change.
"The relationship between Trotman, Hughes, and Exxon should be investigated to determine the existence or extent of any conflict of interest," the report said.
Hughes could not immediately be reached for comment on the report.
Guyana is a relatively poor nation of about 740,000 people. It holds general elections on March 2, and the opposition People's Progressive Party has issued some statements indicating that it will seek to renegotiate oil concessions, although the specifics of its position remain unclear.
Information for this article was contributed by Michael Weissenstein of The Associated Press and by Kevin Crowley of Bloomberg News.
Business on 02/04/2020