ExxonMobil Guyana President warns again against any attempt change 2016 PSA

Declaring that ExxonMobil has no interest in invoking any clause within the Stabroek Block 2016 Production Sharing Agreement (PSA) that could result in changes to the fiscal terms, ExxonMobil Guyana President Alistair Routledge today warned that such a move could undermine future investments in the country.

Since oil production began in 2019 there have been increasing calls for the Government and Exxon to agree to new fiscal terms, including, increasing the Royalty from 2%.

Just last month, the opposition People’s National Congress/APNU said it would review the 2016 PSA with the aim of maximizing the benefits of the oil resources.

But at a press conference today, the President of ExxonMobil Guyana made it clear that any move to increase the Royalty rate could undermine the basis of the investment and hinder future investments.

“We have no interest to invoke that article. We have made US$55B investment worth of commitment to the country. To go back and to undermine the basis of that investment would seriously challenge any future investments,” he told reporters.

Routledge said the investments made to date were based on the agreement in hand, and any modification to the investment basis could undermine the whole premise of those investments. He said stability is not only important to Exxon but other investors as well.

“The stability of the basis for investment is very important not just for ExxonMobil, HESS and CNOOC but I would say for anybody wanting to invest in the country. They want to understand the stability in the fiscal arrangements, in the way those are going to be executed or managed by the GRA or any other agency in the country. Because part of business, we all take, we take a certain amount of risks on investments, and we need to understand that is part of the factoring what would be the ultimate return,” he reasoned.

The ExxonMobil President said while there have been talks that Suriname, under its agreement with TotalEnergies, will receive a higher Royalty – some 6.25% – once its GranMorgu Project in Block 58 goes into operation, it must be noted that Exxon invested in Guyana at a time when the risks were high.

“At the end of the day, all of the elements that go into an agreement like this – a Production Sharing Agreement – are put together at a point in time reflecting the risk that existed. And in order to try and attract investment, and I think, we always need to step back and remember that this agreement has been very successful for Guyana in attracting investment into a basin where nobody had made any discoveries. It de-risked the Suriname drilling because discoveries had been made in Guyana by the Stabroek Block co-venturers,” Routledge said.

He said while persons can cherry pick around issues regarding royalties and other taxes, what is important is whether the country has been attracting investment and driving development.
“And if you don’t attract sufficient investment, development wouldn’t happen and you wouldn’t have the same scale of revenue. So, you could have a larger percentage of a small number or you could have a fair share of a much larger number, ultimately that’s more meaningful for the country,” Routledge said.

The ExxonMobil boss also said that in the case of Guyana, the agreement is delivering value, and attracting investment.

Last week, the Vice President Bharrat Jagdeo said that in an effort to get more out of the 2016 agreement, the Government has Local Content Legislation in place, and has developed a gas to energy project.