Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 36) The 2016 Petroleum Agreement compared – Generosity on a monumental scale

Introduction

Readers will recall that Article 27 – Applicable Law, was addressed in Column 29 which is available on the website of the Stabroek News as well as on chrisram.net. Moving on to Article 28, it is interesting to note that the title of the Article has been modified by the insertion of Social Responsibility before Protection of the Environment. While curious, it is unclear whether this was intentional by the negotiators on the Guyana side, or whether they conflated financial social responsibility with environmental disasters, or worse, they simply could not give a damn.

With the international debate on the environment having been radically altered by undeniable evidence of climate change since Janet Jagan signed the first Esso Agreement in 1999, it would have been expected that Article 28 would have been substantially strengthened. Alas, that is not the case and the only amendment of any substance to this Article is the insertion of a new 28.7 which requires the Minister and the Contractor to establish a programme of financial support for environmental and social projects to be funded directly by the Contractor to the tune of three hundred thousand United States Dollars per calendar year.

On a positive note, this expenditure is not to be included as Recoverable Contract Costs, meaning that the oil companies will bear the cost. Continue reading Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 36) The 2016 Petroleum Agreement compared – Generosity on a monumental scale

Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 35) The 2016 Petroleum Agreement Compared – Force Majeure and Arbitration

Government inaction now constitutes force majeure!

Today we take up from Article 24 which deals with force majeure, the definition of which is set out in paragraph 2.6. This definition has been amended in the 2016 Trotman Agreement. Without any significance, words like “act of God”, “earthquakes”, “floods”, “tsunamis”, “quarantines” and “piracy” have been inserted, events that would be considered as warranting “force majeure” under any jurisprudence but what is astounding is that “governmental inaction” now constitutes force majeure. I have scoured a range of sources and found no instance in any country or agreement where government inaction constitutes “force majeure”. The source of the amendment is either Trotman or Esso and since it favours Esso one has to assume that the amendment was at Esso’s request.

Paragraph 24.1 of the 1999 began with the words “Any non-performance or delay in performance” has now been qualified with the words “wholly or in part”, meaning that a force majeure in one part of this massive area over which Esso (Exxon) exercises control may arguably be grounds for “force majeure” in the rest of the Contract area which extends to thousands of square miles! Continue reading Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 35) The 2016 Petroleum Agreement Compared – Force Majeure and Arbitration

Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 34) The 2016 Petroleum Agreement Compared – Insurance

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) The 2016 Petroleum Agreement Compared – Insurance

Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 33) The 2016 Petroleum Agreement Compared – Tough Terms

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 2016 Petroleum Agreement Compared – Tough Terms

Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 32) The 2016 Petroleum Agreement Compared – Tough Terms

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) The 2016 Petroleum Agreement Compared – Tough Terms