Category: The Road to First Oil

Just a reminder that this series within a series seeks to compare the Janet Jagan administration’s 1999 Agreement with the Trotman 2016 Agreement and as we closed last week’s column we were on Article 20. We now pick up where we left off last week.

Article 20 (1) also contains provisions requiring and regulating abandonment of petroleum fields, the obligation of notice by the Contractor, and the respective liabilities of the Minister and the Contractor for costs incurred or to be incurred. Article 20 (1) (d) (iii) refers back to the Development Plan required to be submitted under Article 8.4 and provides that “the Contractor shall submit for the Minister’s approval a proposed abandonment programme and budget covering all such installations and pipelines provided by Contractor under this Agreement.” This provision is amended by addition in the 2016 Agreement to allow the Contractor to revise the abandonment programme and budget with the agreement of the Minister to account for any changes in the Development Plan.

Absurdly, the 2016 Agreement retains the section of the 1999 Agreement which requires that if the Contractor does not present a timely proposal to the Minister for abandonment, the Minister may, after giving thirty (30) days’ notice to the Contractor, prepare an abandonment programme and budget for the Contract Area!!! Such a major matter should constitute a fundamental breach but instead, the Minister undertakes this substantial responsibility, apparently at his cost! Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 34)”

Local Content

Article 18 which deals with local content has been subject to a number of modifications, the first of which recognises that the activities will be carried out not by the Contractor but by an Operator appointed by the three companies making up the Contractor. In respect of goods and services, the Article requires the Operator to give preference to Guyanese goods and materials of a quality and quantity, timely delivery and competitive prices. In respect of Guyanese Sub-Contractors, preference is to be given if they are commercially competitive and meet financial and technical requirements.

Article 18.2 requiring the Contractor to establish tender procedures remains unchanged for the acquisition of goods, materials and services which shall ensure that Guyanese suppliers and Sub-Contractors are given adequate opportunity to compete for the supply of goods and services. In this regard, there is a new 18.3 requiring the Contractor to train Guyanese suppliers and Sub­ contractors in the procedures for participating in tenders and competing for contracts to be offered in the Operations.

The old Article 18.3 required the Contractor, within 90 days of the end of the year, to provide the Minister with a report outlining its achievements in utilising Guyanese resources during that calendar year. That has now been replaced in 18.4 with a provision that requires the Contractor and the Minister (sic) to prepare a yearly plan for the utilisation of qualified Guyanese resources for the upcoming year. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 33)”

The March of Folly

The 2016 Agreement places greater emphasis on “gas”, or more correctly, “associated gas”, compared with the 1999 Agreement, including superficially minor, but no less significant, changes to Article 11 – Cost Recovery and Production Sharing and Article 12 – Associated and Non – Associated Gas. Neither the cap on annual cost oil – at 75% of total production – nor the equal sharing of profit between Guyana and the Contractors is affected. However, the 2016 Agreement now makes provision for the deduction of cost gas as well as cost oil from the value of production, which value does not include any reasonable own use or losses in operation.

Article 12 has been substantially amended and increased in very significant ways. Most striking is the new Article 12.4 which gives at paragraph 12 (b), to each of the three companies making up the Contractor, the right of “access to and use of any export facility or pipeline or other facilities or infrastructure built by the Government or by any wholly or partially owned Guyanese state enterprises on terms no less favorable than those of any other party having access or use of such facility.”

Even more significantly, paragraph 12 (c) gives the three companies, subject to the payment of a reasonable price and ownership interest in the facilities, the right to participate in the construction, ownership and operation of any of the types of facilities built by the Government or by any wholly or partially owned Guyanese state enterprises or by any third parties on terms no less favourable than those of any other party participating therein! Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 32)”

Introduction

I must start this week’s column by publicly complimenting the painstaking and excellent work done by the technical staff of Ram & McRae in comparing, line by line and word by word, the 1999 Janet Jagan’s Agreement with Esso and the Raphael Trotman’s 2016 Agreement with Esso (not Exxon), Hess and CNOOC. I must also acknowledge that the Ministry of Natural Resources published on its website the annexures to the 2016 Agreement. What it has not published is the Bridging Deed which features prominently in the Agreement, nor has the Ministry published the Prospecting Licence granted to the companies collectively as a group or caused its existence in the Official Gazette as required by law.

Those who have been following the news about oil discovery since June 2015 would have read or seen Trotman on the television with a straight and sincere face that he renegotiated the 1999 agreement by tweaking it here and there and that the only substantive change was an increase in the bonus from 1% to 2%. The comparison shows that Trotman either does not know the meaning of tweaking or – and pardon the strength of my language – he is a compulsive liar. First of all, there was no tweaking of the 1999 Agreement. The 1999 Agreement was completely replaced but to enable the oil companies to retain the benefits thereunder, a Bridging Deed was proposed by Esso and accepted by Trotman.

It would be tedious to readers and take several columns to identify the several significant differences between the 2016 and the 1999 Agreements and the annexures. A general observation between the two Agreements is that while the 1999 Agreement was with Esso, the 2016 Agreement is with three companies – Esso, Hess and CNOOC, each of which will have Affiliated Companies which can benefit from the concessions and facilities under the Agreement. It is also worth noting that none of these three entities have incorporated a domestic company and each has its registered office at the same address – 62, Hadfield and Cross Streets, the same address as Hughes, Fields and Stoby, Attorneys-at-Law.

Now for some of the key new or amended provisions. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 31)”

Today’s column continues a review of the Esso/Hess/Nexen Petroleum Agreement signed on June 27, 2016 and publicly released by the Government of Guyana on December 29, 2017. Last week’s column noted a number of missing parts of the Agreement as well as what the Agreement refers to as a Bridging Deed. That Deed is defined in Article 1 as a separate Agreement signed “on or around the June 27, 2016”, to replace the 1999 Agreement and the 1999 Petroleum Prospecting Licence. Readers will recall that then President Janet Jagan signed the 1999 Agreement in violation of the Petroleum Exploration and Production Act (the Act) to the extent that the company (Esso) was granted approximately six hundred blocks instead of the sixty blocks permitted by law.

The 1999 Agreement and Prospecting Licence appear to have been contained in a single package and included a full description of the blocks and a map of the area allotted to the oil company. The 2016 Agreement merely states that on that date Minister Trotman granted a Petroleum Prospecting Licence for an initial period of four years! In other words, the whole idea of Mr. Trotman was to pretend that the 1999 Agreement never existed. Trotman has to be given credit – this takes legal gymnastics to a completely new level. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 30)”