Author: Christopher Ram

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 50^th. 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 25^th. 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 31^st. 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.

Two days ago, Column 84 set out the main provisions of the 2016 Bridging Deed. That Deed purported to keep alive the 1999 Petroleum Agreement signed by then President Janet Jagan. Effectively, it not only allows the three oil companies all the benefits under the 1999 Agreement, including pre-contract costs, and for the Government to pay their taxes in Guyana, but for those and enhanced benefits to run unchanged to 2056.

No Parliament until then will have the power to make any law adverse to the interest of the oil companies, without compensating them. Nor can the Government stop paying their taxes to the GRA for them. It probably bears reminding that all three companies are incorporated in offshore tax havens and are merely registered in Guyana.

As noted in Column 84, the Bridging Deed describes the Contract area for the 2016 Agreement as the Stabroek Block, “being the area covered by the 1999 Agreement”. Someone forgot to draw to Trotman’s attention that a new licence is expressly prohibited under section 22 (2) of the Act which states in mandatory language that “A petroleum prospecting licence shall not be granted to an applicant in respect of a block which is, at the time the application for the grant of the licence is made, comprised in a licence already granted.” It is clear then that no amount of legal gymnastics could circumvent this express provision prohibiting a second bite of the cherry.

The Government is in a catch 22 dilemma: if it argues, as it does in some places, that the 1999 Prospecting Licence had not expired at the time of the Application for the 2016 Licence, then section 22 (2) applies and there could be no second prospecting licence. And if it claims that the 1999 Stabroek Licence was expired, as Attachment “A” to the Bridging Deed indicates, it has two formidable hurdles. The first is that its purported Relinquishment is meaningless since under section 28 of the Act, relinquishment is only permissible “at any time when the licence is in force”. The second is that Attachment “A” to the Bridging Deed refers to the “expired Stabroek Licence Area”. That in my view makes the Deed ineffective since the 2016 Agreement could not be linked to a dead anything.  

In his lame defence, Trotman embarrassingly argued that the Bridging Deed is like a savings clause, that it is quite normal. What Trotman does not seem to realise is that a savings provision has to be expressly permitted in legislation, or in some higher document, not in any agreement or instrument of lesser status.        

Odd things happen

Here is another oddity: the Deed provided for the signing of the New Petroleum Agreement. The only trouble is that on the date of the Bridging Deed, the New Petroleum Agreement had already been signed and executed. Someone interfered with and initialled the date on the Deed but actually made it worse, and worse still, the change was not initialled by all the signatories to the Deed as is required.

A requirement set out in the Bridging Deed that the National Assembly approve an Order under s51 (1) of the Petroleum Exploration and Production Act, modifying certain specified tax laws to the Oil Companies, and the gazetting of the Order may not be so unusual, except that our sovereign body was expected to do so in within a time demanded by the oil companies. More importantly however, the Deed required the Minister of Finance to table a copy of the New Petroleum Agreement in the National Assembly when he brought the “tax modification” Order there. The Minister failed to comply. The inescapable inference is that he wanted to, and managed to hide the Agreement from the National Assembly and Guyanese until the Government was embarrassed into publishing it following the revelation of the Signing Bonus. Because the omission to table the Agreement did not prejudice the interest of oil companies, they too could not care less. 

Looking after our interest

But the question must also be asked of the Escrow Agent Sir Shridath, a long-term consultant to the Government of Guyana: why did he not carry out his obligation to ensure that the conditions of the Bridging Deed were met by both sides? As a beneficiary of the public purse, did he not consider himself as having any obligation, fiduciary or otherwise, to the people of this country to see that undertakings made in their interest are honoured?

As a public official, the Minister is required to exercise discretion in making decisions. The Bridging Deed however took away much of his discretion under the law by setting out in advance what he would accept as Notices, and the text and extent of the Application for a Licence, including for the granting of a licence in respect of more than sixty blocks. By specific law, this has to be justified by special circumstances. Those who make Venezuela the bogeyman ignore the fact that many of the blocks awarded under the 1999 and 2016 Agreement are in undisputed waters and a significant number are much closer to Suriname than to Venezuela, and therefore raise no threat. And while the law allows the Minister a discretion in a section 51 tax exemption, the Bridging Deed made it into a condition.

Nothing however shows Exxon’s bad faith is its announcement of a major find, one day after the Granger Government awarded them a tainted Petroleum Agreement made possible by the infamous Bridging Deed. It is either trickery or conspiracy. We Guyanese need to take our pick.

In concluding on the Deed tomorrow, the column will touch on some current developments.

This Column regards the Bridging Deed conceived by some artful legal mind as going to the heart of the 2016 Petroleum Agreement – one of the first major economic acts of the Granger Administration. The handmaiden for the transaction was Mr. Raphael Trotman in his capacity as Minister of Natural Resources while its custodian or guarantor was Sir Shridath Ramphal. In an article in the Kaieteur News of February 1, 2018 seeking to justify the Administration’s refusal to make the Deed public, Trotman claimed that he needed to consult Sir Shridath Ramphal on the release of the document. He volunteered that there was nothing sinister about the Deed (with a capital “D”) and that Ramphal was selected as its guardian because the Government and Esso had confidence in him as a good person. In the subsequent two years, Trotman has been eloquently silent.   

Column # 83 published last Friday revealed things about the Deed that challenge Trotman’s language. Because of my assessment of the Deed’s fundamental importance to the country, I sought and obtained the agreement of the senior editorial management of the Stabroek News to carry three columns this week – Tuesday, Thursday and the concluding piece on the usual Friday. This first part is descriptive not judgmental, objective rather than subjective, narrative rather than critical. That was also the approach I took when in the earlier segments of this series of columns I dealt with the Agreement proper.

Here are some of the key elements of the Deed.

It was made on 29^th. June 2016 and had four parties: the Government of Guyana and three oil companies – Esso Exploration and Production Guyana Limited (Esso), Hess Guyana Exploration Limited and CNOOC Nexen Petroleum Guyana Limited. They listed as their countries of incorporation Bahamas (Esso), Cayman Islands (Hess) and Barbados (CNOOC Nexen) and their registered office 62 Hadfield and Cross Streets, Georgetown, Guyana.

The Contract area is described as the Stabroek Block, “being the area covered by the 1999 Agreement”.

The Deed appoints as Escrow Agent Sir Shridath Ramphal of a Barbados address. It refers to an Escrow Letter dated the same date as the Deed sent from the Escrow Agent to the four Parties. The letter sets out the terms of the Escrow Arrangement whereby the Escrow Agent holds the Documents on behalf of the parties “subject to the satisfaction of certain conditions”. The terms “documents” and “Escrow Conditions” are defined only as having the meaning set out in the Escrow Letter.

The Deed is signed by Minister Raphael Trotman for the Government while the same persons who signed the 2016 Petroleum Agreement signed the Deed for the oil companies. There were two witnesses to each signature to the Deed while a single and different person signed as witnessing the execution of the Petroleum Agreement. The Agreement was made on the 27^th of June 2016 and the Deed was made on the 29^th of June 2016.   

In terms of contents, there is the Deed proper which runs to twelve pages. The Deed has the following attachments: Schedule 1 – Form of Notice of Intent to Relinquish; Schedule 2 – Form of Relinquishment Notice; Schedule 3 – Form of Regulation 28 Application; Schedule 4 – Section 51 (1) Modification (by Minister of Finance); Schedule 5 – Form of New Licence Application; Attachment “A” – Application for Petroleum Licence concerning the expired Stabroek Licence Area; and Part B – Form of section 14 (2) (a) Notice acceptance of conditions for the grant of a licence.  

Action/Decisions required under the Deed

A – On the signing of the Deed

1. Parties to procure that the Escrow Agent sign Escrow Letter and Parties to countersign the Escrow Letter.

• Parties to sign and deliver six copies of New Petroleum Agreement to the Escrow Agent for Registration at Deeds Registry. Minister was required to retain one of the Originals, a copy of which was to be provided to the National Assembly as part of the section 51 of the Petroleum Act with respect to taxation.

• Oil companies to sign but leave undated two originals to the Relinquishment Notice and New Licence Application and deliver the signed originals to the Escrow Agent.

• The Minister to sign and deliver to the Escrow Agent two undated originals of the section 14 (2) (a) Notice. Section 14 (1) deals with the notification of the granting of a licence while 14 (2) (a) deals with the acceptance of that licence; and

• Esso on behalf of the Contractor Parties to sign and deliver to the Escrow Agent two undated originals of the Section 14(2)(a) Notice.

B. Within five business days from the date of the Deed

1. Oil Companies to sign and deliver to the Minister a Notice of Intent to Relinquish with intended Relinquishment conditional on the following:

1. The receipt of dispensation form Minister pursuant to Regulation 28 application. This regulation deals with modification of requirements in relation to the keeping of records, the surrender of records, and the maintenance of accounts.

• The National Assembly to approve an Order under s51 (1) of the Petroleum Exploration and Production Act, modifying certain specified tax laws to the Oil Companies, and the gazetting of the Order.

• Esso on behalf of the Contractor Parties as well as the Minister to deliver Confirmation Notices pursuant to clause 4.2 of the Escrow Letter before the Escrow Termination Date. In the absence of the Escrow Letter it is not possible to ascertain other than by speculation what clause 4.2 is all about.

• Following which the Minister to deliver to them, within thirty Business days, confirmation note that Regulation 26 will be dispensed.

• Before delivering the Confirmation Notice to the Escrow Agent, the Minister to give Oil Companies no less than five Business Days’ notice of his intention to do so.

• Parties to coordinate with Escrow Agent to arrange a suitable Completion Date following satisfaction of the Escrow Conditions. The Deed defines the Completion Date to have the meaning given in the Escrow Letter.

Column 85 to be published this coming Thursday will discuss some of the contents of the Deed.

This Column has finally been able to put its hands on the Bridging Deed referred to in Article 30 of the Petroleum Agreement signed by the APNU+AFC Government and Esso, Hess and CNOOC/Nexen. The Deed, is frightening in its intent and far too clever in its execution, signed more than one year after the oil companies had hit gold. Key players in the Deed, other than the oil companies are the ubiquitous Raphael Trotman, then Minister responsible for Petroleum and Sir Shridath Ramphal, described as the Escrow Agent and keeper of what is described as the Escrow Letter.

According to the Bridging Deed, Sir Shridath agreed to hold the Documents – circuitously described to have the meaning assigned to it in the Escrow Letter, but which is itself a closely guarded secret! It is unclear whether Sir Shridath performed any other functions in connection with the Bridging Deed or the Petroleum Agreement and how he was compensated but if he was paid by the Government of Guyana, it is hoped that in the cause of transparency, particulars of that arrangement will be shared with the Guyanese public.  

What the Bridging Deed sought to do

The Bridging Deed sought to give life to the expired 1999 Agreement signed by then President Janet Jagan under the authority of section 10 of the Petroleum Exploration and Production Act. Under that Agreement, Esso was granted a Prospecting Licence over some 26,806 SQ. KM, much more than normally permitted by law. The law allowed for a Prospecting Licence initially for four years plus six months and subject to two extensions of three years each. Unless during that time, there is an application for a production licence, the Agreement lapses, the oil blocks go back to the State.

During the ten year period however some things happened – there was the Surinamese incursion into Guyana’s territorial waters leading to a Force Majeure and the extension of the period of the licence by the duration of the Force Majeure. The information on when the 1999 Agreement expired is a bit blurred but what is known is that shortly after the APNU+AFC came to power in 2015. The other big thing was the late discovery of oil announced in 2015 and the realization by Exxon that its time was fast drawing to a close. It needed to come up with some trick, to do it fast and to hide it.   

At the same time, it sought to put pressure on Trotman and the Government to treat the 1999 Agreement as if it never existed and to get a completely new Agreement.

That required legal gymnastics and some clever mind then came up with this idea of a Bridging Deed. Bear in mind that at this stage, the oil companies knew they were sitting on a gold mine but their time had expired or was soon to expire. Someone thereupon advised the oil companies to belatedly relinquish the extensive holdings but to replace it with a “new petroleum prospecting licence and to enter into a new petroleum agreement, in respect of the Contract Area.”

Audacity

Compounding the wickedness, the authors of the Bridging Deed audaciously including as one of the Recitals in the Deed, the following:

“Pursuant to section 10 of the Act, the Minister has entered into this Deed together with the Contractor Parties to set out the process whereby 1999 Licence and the 1999 Petroleum Agreement will be replaced by a new petroleum prospecting licence and petroleum agreement in respect of the Contract Area.”

Section 10 of the Production Exploration and Production Act gives the Minister no power to enter into any Deed and certainly not one to breathe life into an expiring Agreement. In fact, what the section does is grant the Minister the power to enter into an agreement not inconsistent with the Act, (emphasis mine), with respect to any or all of a four specified matters, namely, the granting of a licence, the conditions attaching thereto, the procedure to be followed in exercising any discretion granted to him under the Act and any matter incidental thereto. Perhaps Trotman or some legal luminary will explain how section 10 can be read to give Trotman the supernatural power to revive a dead Agreement via some artificial device.

Burnham weeps

It is hard to be diplomatic about any person who conspires to sell or who sells the national interest whether on the basis of grand incompetence or grand corruption but Trotman, his advisors and the APNU+AFC Government are guilty of the worst act against Guyanese and Guyana. Trotman had a duty to tell the oil companies that their proposal to employ Guyanese nationals as cleaners, drivers and security guards not only did not meet the test of satisfactory to him as Minister but was downright insulting to us as a nation.

Trotman had a glorious opportunity to correct the wrong inflicted by the 1999 Agreement in respect of the number of blocks awarded. At least Janet Jagan could plead that hers was a pre-discovery Agreement but what can Trotman plead? A person of average intelligence aware that oil was found would have insisted of Guyana’s right under section 22 of the Act to an interest in any venture for the production of petroleum in the blocks. Trotman did not.

Trotman could have told the oil companies that the 1999 Agreement had run the clock and that his powers were constrained by law and that relinquishment was not a choice or option open to them. Instead, Trotman allowed himself to be bullied or led into agreeing to relinquishment being conditional on his taking certain action and if he did not, the Notice of Relinquishment by the oil companies would be considered withdrawn and “the 1999 Agreement shall continue in full force and effect.” No, that is not how a sovereign country operates. That thing came to an end and that was it.

This spinelessness demonstrated by the APNU+AFC and Trotman is disgraceful and shameful to us as an independent, sovereign nation. This is as big a sellout of a country’s patrimony imaginable. That this embarrassment is being imposed on Guyana by a Government led by Forbes Burnham’s own Party and people for whom he no doubt had the greatest of respect, must make him weep.