Category: The Road to First Oil

Reclaiming Guyana’s Oil Wealth: Confronting Political Cowardice and the Surrender of Sovereignty Part 2

Introduction

Last week I called out the political leaders for their cowardice and dishonesty for hiding behind “sanctity of contract”. Someone pointed out that I seem to have spared Shuman’s Liberty and Justice Party and the United Force (if it exists). That was an oversight.

The response to last week’s column was silence from the political parties, no doubt hoping that this too will pass. I will not let up or let them off the hook. So, what I have done is compiled a Survey Questionnaire which I am sending not only to the political parties but to business organisations, including the PSC, to trade unions and to other CSO’s in the country.

Before going into the Survey, I want to address some of the simple options available to our political leaders in righting some of the wrongs. Here are a few.

Independent Petroleum Commission. The establishment of an Independent Petroleum Commission, free from political interference and empowered to stand up to multinational corporations, is not just desirable – it is absolutely necessary to reassure Guyanese that everything possible is being done, and is seen to be done, in protecting the country’s sovereignty over its natural resources. Such a Commission must be independent of the politicians rather than their conduits, as is the case of so many state entities, commissions and other bodies. A united national front is crucial, but it must be one that places Guyana’s interests first. Such a Commission should include economists, petroleum specialists, legal and financial experts who can match the expertise of the oil companies at the negotiating table.

OECD/G20 Tax Framework. Another important option available to the country is the ability to leverage international agreements, like the OECD/G 20 Framework for a 15% minimum global tax, to our advantage. Guyana is in the unfortunate and undesirable position in which it is among a minority of countries not to have ratified the Framework. This omission can be corrected in the shortest possible time, making the tax regime of the country compatible with international norms. Once done this is done, it would be hard to see Exxon crying foul and a breach of the 2016 Agreement. Instead of hiding behind the shield of “sanctity of contract,” this tool will provide Guyana the opportunity to collect billions in taxes for which it can issue legitimate receipts instead of what now takes place. Equally importantly, it does no harm to the country’s reputation for following international norms.

Ringfencing: This is probably the easiest of all. All the Minister of Petroleum has to do is set a simple condition in a Production Licence that exploration costs in looking for petroleum outside of the Production area are not recoverable expenses against revenue from production. It is the ultimate in dereliction that this condition has NEVER been applied.

The betrayed citizens

It is against this background that citizens must demand that all political parties publicly declare their positions and strategies on the 2016 Agreement and hold them accountable for any stance that compromises our national sovereignty. This should include a commitment to full transparency in all dealings with oil companies, regular public updates on the state of our oil resources and revenues, and a clear plan for how to increase our take and how oil revenue will be used to benefit all Guyanese.

As Guyanese look towards the 2025 elections, they deserve more than empty rhetoric and vague promises, or the repetition of broken promises. They also need leaders who understand that true sanctity lies in protecting the interests of the Guyanese people, not in defending a flawed contract and protecting the oil companies to the detriment of the country. We need comprehensive, expert-backed proposals for renegotiation that reassert our sovereign rights over our resources.

The upcoming elections are probably the last chance for the country to correct the misdeed of the APNU +AFC Coalition and the broken promises of the PPP/C. What is staggering is that the Agreement allows for its modification by mutual consent which both major parties use as a scare-mongering bogeyman, accusing critics of calling for an abrogation of the Agreement. To use Jagdeo’s words, “they have sold us out,” but the only thing is that he has now become part of the “they.”  The tools are available, and the opportunities exist to level the playing field with oil companies.

What does not exist is the political will and courage to face up to the evil brought upon the country, led by politicians who cower in the face of this challenge and who willingly cede our sovereignty to foreign interests.

The Survey

Here is a brief overview of the survey questionnaire.

First and foremost, the Questionnaire seeks to understand awareness of Article 31.2 of the Petroleum Agreement, which allows for amendments with the contractor’s consent. The survey highlights several contentious issues within the agreement:

1. The meagre 2% royalty rate
2. Lack of ring-fencing provisions
3. Guyana paying taxes on behalf of oil companies
4. Oil companies receiving tax certificates for credits in their home countries for taxes which they have not paid.
5. Guyana only being guaranteed 12.5% of gross revenue, in addition to the royalty.

Perhaps most alarming is the 40-year stabilization clause, which prevents new legislation that could affect oil companies’ interests. This clause effectively surrenders Guyana’s sovereignty and ability to adapt its laws to changing circumstances for decades to come.

Another critical issue is the Natural Resource Fund (NRF) and its withdrawal rules. The current arrangement, which allows the government to withdraw US$3,700 million of the first US$4,000 million the country earns per year, raises serious concerns about intergenerational equity and long-term resource management.

It’s worth noting that the petroleum world has numerous examples of countries successfully renegotiating oil contracts when circumstances change or when original terms are found to be against national interests. Our leaders’ failure to even consider this option is a dereliction of their duty to protect Guyana’s interests.

Respondents have been given fourteen days in which to respond and the results will be highlighted in future columns. It will be a good measure of who deserve the support of the Guyana electorate in 2025. The results will be published.

Please note that the questionnaire is available on chrisram.net and I invite everyone to participate.

https://docs.google.com/forms/d/e/1FAIpQLSflDY4pKOVQ7FQbMbnI98lrTveGIgDkd2pMgxoJj8GD0tSTYQ/viewform?usp=sf_link

Reclaiming Guyana’s Oil Wealth: Confronting Political Cowardice and the Surrender of Sovereignty

Introduction

Over the past three weeks, this Column has shown how the PPP/C has reversed its pre-election promise to review and renegotiate the 2016 Petroleum Agreement. But it actually did worse – reversed its commitment to an independent Petroleum Commission, failed to provide elementary conditions on ringfencing, and is one of the minority of countries refusing to sign the OECD Framework on a minimum corporate tax on major companies. As Guyana gears up for general and regional elections in 2025, thoughts should turn on whether the PPP/C will pay a political price: they should but that is unlikely because none of the political parties is any better.

From all of them – the PNC -R, the AFC, ANUG and the WPA – there is a silence that is not only disappointing and deafening but amounts to a collective surrender of our sovereignty by the entire political establishment. The PPP’s dramatic shift from promising to “review and renegotiate” to now parroting “sanctity of contract” is like a stab in the back of our country. This phrase has become their shield, a convenient excuse for inaction, a dereliction of duty and a betrayal of the national interest. But let us be clear: there is no sanctity in an agreement that fails to protect the interests of the Guyanese people. The only thing sacred should be our nation’s right to benefit fully from its natural resources.

Exxon over Guyana 

This misplaced reverence for a flawed contract is not just misguided – it’s a dangerous ceding of our national sovereignty. By treating the 2016 Agreement as untouchable, our leaders have effectively handed over control of our resources to foreign corporations. They have prioritised the interests of ExxonMobil and its partners over the wellbeing of the Guyanese people.

The stability represents a surrender of our right to adapt our laws and regulations to changing circumstances and national needs. This seems more like subjugation rather than sanctity. It ignores the fundamental principle of fairness in international law. After all, the petroleum world is replete with cases in which countries have successfully renegotiated oil contracts when circumstances have changed, or when the original terms were found to be against their national interest. Our leaders’ failure to even consider this option is a dereliction of their duty to protect Guyana’s interests.

The other Parties

The PPP/C’s reversal and culpability in no way exonerate the PNC -R whose leader has literally been all over the place when it comes to taking a position. That its former leader President David Granger reportedly pressured his Minister into signing the lopsided agreement is hardly an excuse for its cowardly silence. The Party seems bankrupt of ideas, bankrupt of expertise and bankrupt of courage in what is clearly the most important issue facing the country now and for the next thirty years. Their current leader’s apparent ignorance of the agreement’s details is an indictment of the Party’s fitness to govern. Such willful ignorance is not just embarrassing; it’s a dangerous abdication of their role as the opposition, failing to provide the necessary checks and balances our democracy requires.

The WPA, once a party of principled struggle, has been reduced to debating how to distribute crumbs while our nation’s wealth is carried offshore. Their myopic focus on cash transfers without addressing the fundamental inequities of the agreement is a betrayal of their revolutionary heritage and a sad spectacle of a party that once fought for true independence now acquiescing to what amounts to modern-day economic colonialism.

And the AFC’s claim of studying the issue without producing any tangible output is political procrastination at its worst. While the signature of its General Secretary Raphael Trotman brought the illegal Agreement into force, he has written a book calling for  a Commission of Inquiry into the Agreement, implicitly suggesting that there are good grounds for serious concern. The Party seems hamstrung by the election as its Leader Mr. Nigel Hughes  who is in another role, the Attorney-at-Law for all three of the contractors – Exxon, Hess and CNOOC. Hughes has made it clear that he has no intention to give up his professional relationship, adding that he would not seek to influence the Party’s position. While barely acceptable, it is surely unfortunate that the Leader is unable to lead in such in critical sector of the economy.

The other Party of some note is the ANUG, also led by an attorney-at-law but which has been the most silent of all.

Conclusion

This collective failure to challenge the 2016 Agreement is a de facto endorsement of the surrender of our sovereignty. By their silence and inaction, every major political party in Guyana has become complicit in this grand ceding of our national rights and resources. They have collectively failed to uphold the fundamental principle that a government’s primary duty is to protect the country’s resources and to advance the interests of its citizens. The citizens are faced with not a single party providing leadership, guidance, opportunities for debate or any other form of assistance, information or direction on our oil economy and our Government’s subservient role in the sector.

What makes the whole situation so very bad is that they show no interest in the provision in the Agreement which allows Guyana to ask for any amendment or modification which Article 31.2 of the Petroleum Agreement. They ought to be ashamed to place “sanctity of contract” over permanent sovereignty over our natural resources and ousting the role of the Parliament and the Constitution.

This column acknowledges the consistent role played by Mr. Glenn Lall and the Kaieteur News and the column which this newspaper has carried since June 2017. Unfortunately, our politicians seem oblivious of all that is being said and written, immune from both direct and indirect criticisms of their disservice and the cost of their inaction and disinterest to our country.

Next week’s column will identify opportunities and make recommendations which they are likely to ignore. What a shame!

Sanctity of Contract vs Sovereignty over Natural Resources – Part 3 (Final)

Introduction

This is the final part of an adaptation of a talk I gave last July at a forum sponsored by the US NGO Oil and Gas Guyana Network (OGGN). The thrust of my contribution was that the Government’s excuse for reneging on its commitment to “review and renegotiate” the 2016 Petroleum Agreement is specious and opportunistic. Even more significantly, the Government ignores the sovereignty issue addressed in Column #134 and more devastatingly, the constitutional question which of course is related to sovereignty.

Today’s column looks at what is described as the Stability Article in the 2016 Agreement, generally referred to as a stability clause. In essence, this Article serves as a protective shield for the oil companies and is designed to maintain a stable legal and economic environment for their investment in Guyana. In effect, the clause freezes the law as it stood in 2016, ensuring that the conditions prevailing at the time the Agreement was signed, would endure until 2056 when the period of exploration and production ends.

Recall that the Agreement was signed by a Minister, and only its tax provisions were incorporated into subsidiary legislation – not the Agreement as a whole. I have always argued that the section under which a Licence could be granted did not allow for Exxon to be issued with another agreement after the 1999 agreement had expired, but that is neither here nor there now. Unfortunately, the APNU+AFC coalition government recklessly bowed to pressure from Exxon and gave them a further license in 2016 by an artifice called a Bridging Deed. Sadly, Guyana now has to live with that Agreement for the next 40 years or so.

Assessing the Stability Clause 

Yet, the fact that the Agreement may not now be set aside does not mean that every provision therein is untouchable. Indeed, any provision in the Agreement which violates the Petroleum Exploration and Production Act, if challenged, would be held to be invalid. But let us assess the Stability Clause against the following provisions of the Constitution.

Article 65 (1): Powers and Procedure of Parliament provides that “Subject to the provisions of this Constitution, Parliament may make laws for the peace, order and good government of Guyana.”

Article 8 which provides that “This Constitution is the supreme law of Guyana and, if any other law is inconsistent with it, that other law shall, to the extent of the inconsistency, be void.”

Articles or language similar to Article 65 (1) is common in many Commonwealth constitutions and is generally interpreted to confer plenary legislative authority, subject only to express any constitutional limitations. Such a provision is interpreted extremely widely, subject only to other constitutional provisions, including fundamental rights and the separation of powers. Article 8 on the other hand, establishes the Constitution as the supreme law, rendering any laws inconsistent with the Constitution void to the extent of the inconsistency.

Hierarchy

Here then is a hierarchy with the constitution sitting at the apex of the legal system followed by laws properly passed, international Treaties between States, subsidiary legislation and administrative powers and decisions. What this Stability Clause seeks to do is insulate the Agreement from changes, even made under the authority of the Constitution, a clear constitutional and statutory heresy. Here is how it does so.

1. It nullifies Parliament’s power to legislate granted by Article 65(1).
2. It violates the principle of constitutional supremacy established in Article 8.
3. It binds and disempowers future parliaments, as well as Permanent Sovereignty over natural resources, and in respect of fiscal and environmental matters. Such a situation would be completely unacceptable in the UK whose courts have consistently held that no Parliament can bind its successors. UK has parliamentary sovereignty whilst Guyana has constitutional sovereignty, which would mean that a stability clause, unless quite reasonable, will not be enforceable here.

Article 32 of the 2016 agreement is simply too wide and too long. No court can rule that a decision by a minister of government, even if acting within his administrative powers, could prevent successor ministers, Cabinet and Parliaments from carrying out their or its powers in future years.   

Changing judicial attitudes

It is true that the legal community has generally nodded in approval at Stability Clauses, with international arbitrators – often coming from the investor countries – upholding their validity. The trend in recent years, however, has been towards more nuanced approaches. The rigid freezing clauses of yesteryear are giving way to more flexible mechanisms that seek to maintain economic equilibrium rather than absolute legal stasis. This shift represents an attempt to balance the legitimate needs of investors for predictability with the equally valid requirements of states to govern in the public interest, to exercise sovereignty over their natural resources, and to exercise constitutional powers.  

And here is a great real-life example from 2015 in Israel concerning a 10-year stability clause for a gas deal, in which the Israeli Supreme Court ruled that the stability clause in the gas deal was unconstitutional because it limited the government’s sovereignty provides a strong precedent. Applying the same legal principles and logic, Article 32 in the 2016 Agreement will not prevail. Here is why.

1. Guyana’s Constitution has supreme authority. No agreement, regardless of its perceived importance or the principle of “sanctity of contract,” can supersede constitutional principles.

• Duration of the agreement: The 40-year timespan extends far beyond the term of any single government or minister, raising serious questions about democratic accountability and hobbling future governments from making decisions in the best interests of their citizens.

• Limitation on governmental powers: No current government should be able to bind successor governments over such an extended period.  

• There is simply no jurisprudential basis supporting the notion that contract sanctity can override fundamental constitutional principles and national interests.

Quite frankly, the current Government is fully aware that the stability clause is unconstitutional and would be struck down if an application was made to a court of standing. I began this (US) talk by quoting Irfaan “review and renegotiate” and “we will renegotiate” by Irfaan Ali and Bharrat Jagdeo respectively in statements prior to the PPP assuming power in 2020. Now we hear the  nonsensical and hypocritical cant  about sanctity of contract.

Dr. Maurice Odle in a recent autobiography who attributes the reversal to the PPP/C’s visceral fear of alienating America’s interest, mindful of the US’s role in the PPP’s removal from government in 1953 and 1964. Odle sums up the PPP by saying that “remaining in office is more important to the Party than the effective maximisation of benefits according to the people of Guyana.”

Not only is this explanation as plausible as any but more dangerously, the PPP/C is sacrificing both permanent sovereignty over natural resources as well as the our constitutional sovereignty.  

Sanctity of Contract vs Sovereignty over Natural Resources – Part 2

Introduction

This column is a continuation from last week which featured an adaptation of a presentation I made at an OGGN sponsored activity in New York last July 27. Recall that last week’s column described the meaning of sanctity of contract and the several exceptions which would negate the principle. The column showed facts and examples which stripped the principle of its relevance and application, a pointed response to President Ali and Vice President Jagdeo who embrace “sanctity of contract”, as an excuse for their refusal to honour their election campaign commitment to renegotiate. Today’s column looks at the principle of sovereignty, approaching it from two angles – the issue of sovereignty over natural resources, and second, sovereignty as a constitutional right and power of states.  

Sovereignty over natural resources

The Petroleum Production Act (now repealed and set out in the Petroleum Activities Act) addressed the question of sovereignty in the context of ownership by providing as follows: “The property in petroleum existing in its natural condition in strata in Guyana is hereby vested in the State, and the State shall have the exclusive right of searching for and getting such petroleum.” Put another way, the State has an inalienable right to the natural resources within its territory. That statutory provision goes back some eighty-five years, long before the 1962 UN General Assembly adopted Resolution 1803 which elevated the right to one recognised as part of the international legal framework, one that even trumps nationalisation, meaning that the only remedy available to any person would be monetary compensation, but not specific performance. I submit that no court or arbitral body would compel any state to return a concession.

A close look at the first three paragraphs of Resolution 1803 is most instructive. Summarised, they affirm a nation’s right to control its natural wealth while providing a framework for responsible development and attracting foreign investment, mandating that resource utilisation must foster national development and enhance citizens’ well-being. They also allow the state to set its own terms for resource management, to establish rules governing the exploration, development, and disposition of natural resources, including the regulation of foreign capital inflows and seeks a balance between foreign investment and national sovereignty.

The disagreers

Not everyone was happy with “allowing” sovereignty, let alone permanent sovereignty  to non-western countries. For example, in hardly disguised racist language, Henry Kissinger, the doyen of American diplomacy stated, “Oil is too important a commodity to be left in the hands of the Arabs”. To his hypocritical credit, Kissinger also said that “The contemporary world can no longer be encompassed in traditional stereotypes. The notion of the northern rich and the southern poor has been shattered. Mary Pillsbury Lord, the flour heiress, criticised the 1952 Resolution as “Unfortunate history”, while others went further, demanding equal terms to the trade and the raw materials of the world.

Sovereignty is no academic construct, but a foundational principle of international law recognised by a UN International Law Commission. Importantly, permanent sovereignty is intended to further national and collective interest. The very concept is designed to overcome economic injustice, the direct legacy of colonialism. Importantly too, is that economic sovereignty is the basis of political sovereignty. One does not exist without the other. Or as one of the original thinkers on the sovereignty question said: Sovereignty is or is not. There is no concept as partial sovereignty.

No silver bullet

It would be incorrect to identify the UN Resolution as transforming the international arrangements for the control of petroleum resources. The lock into which the West had gripped the Middle Eastern countries – colonial control, political structures and oil agreements – were shackles from which it was not easy to free themselves. Indeed, the 2016-type of Agreement signed by Guyana was certainly not atypical in the colonial era. We must remember too, that the West had installed leaders like the Shah of Iran who were favourably disposed to the American and British oil companies.

In fact, things really changed after the upheavals in the Middle East which eventually led to the OPEC countries flexing their muscles, taking control of the market via embargo and production and price fixing, all with grave consequences for the world economy. One undeniable consequence was that the countries exerted full sovereignty and control over their petroleum resources.

On the other hand, Guyana moved backwards, ceding sovereignty over its petroleum resources to two American and one Chinese companies. The shameful difference between Guyana and the OPEC countries is that our political leaders willingly sold us out (to use Jagdeo’s words), rendering irrelevant the UN Resolution on permanent sovereignty over natural resources. 

The final instalment on the subject will examine how we have ceded constitutional sovereignty to the oil giants.

Sanctity of Contract vs Sovereignty over Natural Resources

Introduction

This column is an adaptation of a presentation I made at an OGGN sponsored activity in New York last July 27. OGGN is a US registered NGO with its membership drawn from the Guyanese Diaspora in North America, Europe and the Caribbean. Dr. Vincent Adams and I were the two presenters. Adams spoke on the environmental implications of intensive fossil fuel production in a concentrated area of 26,000 km² and of his tenure as head of the (Guyana) Environmental Production Agency from which the PPP/C Administration removed him following the 2020 elections in Guyana. Adams was able to embellish his presentation with anecdotes, incidents and several confrontations he had in the EPA’s oversight of the much discussed and criticised 2016 Petroleum Agreement. That agreement was signed by the APNU+AFC Coalition Government and a consortium of oil companies headed by the American giant ExxonMobil Guyana Inc. a far-removed subsidiary of ExxonMobil Corporation of the USA.

The theme of the activity was Sanctity of Contract  versus Sovereignty. Let me begin this presentation by showing two clips that are widely available on social media, one by President Irfaan Ali and the second by Vice President Bharrat Jagdeo.

Having come into Government, both Ali and Jagdeo have left those commitments behind, now repeating the mantra “Sanctity of Contract” . So, for today’s talk, I will look at sanctity and argue that this is not an absolute rule of law but rather is one that is subject to a number of exceptions, anyone of which could cause a contract to be set aside. As I hope to show, the 2016 Petroleum Agreement can be set aside under several of these exceptions.

In this first part of the adaptation, I invite you to look first at the excuse being used by the PPP/C.

Sanctity of Contract

The sanctity of contract is a legal principle which states that agreements, once freely made, should be honored and enforced. It means:

1. Contracts are binding.
2. Parties must fulfill their promises.
3. Courts generally uphold valid contracts.

This principle is important, promoting trust and stability in business relationships. However, when called upon, the courts not only consider the exceptions such as fraud, duress, illegality and unconstitutionality, but may also balance “sanctity” with fairness and the public interest.

First and foremost, my view is that having exhausted an earlier 1999 Agreement between Esso and the Government, Exxon was NOT ENTITLED to a second Agreement. Section 10 of the Petroleum Exploration and Production Act of 1986 conceived of a single Agreement that is phased out after ten years, barring any production licences issued under the Agreement. In essence, section 10 grants the Minister the power to enter into an agreement not inconsistent with the Act with respect to any or all of 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.

Illegality

But this provision was turned on its head under a so-called Bridging Deed conceived by Houston Texas in which one of the recitals states as follows:

“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.”

It is ironic that the Exxon who is now hiding behind “Sanctity of Contract” described at the April 2016 meeting that “the current (1999) agreement with Esso was in several ways out-of-date with what prevails administratively in Guyana and that an approach to Esso in 2010/11 to deal with that was politely declined.” Exxon’s team added that their company was prepared to move to a new “current specimen format for their agreement,” prepared and ready for GGMC to review. Here for all to see is Exxon admitting that it wrote the 2012 Model Petroleum Agreement which was subsequently handed to then Natural Resources Minister and blessed by President Ramotar.

Of particular relevance too, is a report by Clyde & Co., an international law firm based in London, which discloses that Brooke Harris of Exxon was actively engaged in the drafting of the Cabinet Paper on the 2016 Agreement. To be clear, the illegality lies not in the Cabinet Paper but in the granting of a second Agreement and the infamous Bridging Deed. Drafting of the cabinet paper was a sovereignty issue.

Duress

In April 2016, a technical team from the Guyana Geology and Mines Commission visited Exxon in Houston to discuss technical matters relating to a first discovery of oil announced in May 2015. Exxon threatened the Guyana Team with withholding investment until they were granted a new contract. This is how the Head of the GGMC Team reported the threat.

“Esso then confronted with GGMC the matter of their Contract and Licence… For Esso to start spending, the replacement petroleum licence and agreement is needed, along with the undertaking that the Development Plan and permitting would be done in good time.”

Even the Minister whose signature appears on the 2016 Agreement had grave doubts about the Agreement, writing in a book published after he demitted office that he and his Legal Officer “harboured some discomfort about signing”, which he claims, “did not go down well with Exxon top brass”.

Fairness

On the question of fairness, here is how the 2016 Agreement has worked in terms of distribution of the number of millions of barrels of oil produced. Yes, the oil companies have a right to recover their costs but as the numbers below show, Guyana received 12 % of the total oil produced in the first four years of oil production. Twelve percent must rank as one of the lowest host Government take anywhere in the world. It seems that the 2016 Agreement effectively transferred Guyana’s patrimony and good fortune to Exxon, at the expense of its people.

Compiled by: Ram and McRae

Source of Information: Budget Speech

Next week’s column will discuss unconstitutionality as an element of sovereignty and ask which one the Government thinks ought to prevail.