The lack of ringfencing provisions in the ExxonMobil Production Sharing Agreement (PSA) will see Guyana paying for all unsuccessful wells. This was made clear today by Commissioner General of the Guyana Revenue Authority (GRA), Godfrey Statia.
The Tax Chief said that he has held several consultations with global firms such as the International Monetary Fund (IMF) on the matter.
He said, “The IMF made it clear. We screwed up. We should have put ring-fencing provisions in the contract. Without it, the people (ExxonMobil) are legally empowered to allocate whatever costs they incurred to their recovery bill. And they have started doing that and we have to pay. It is just a matter of auditing to make sure that the costs are not inflated…”
Now that Guyana’s basin has been de-risked, Statia said that the government should require that future oil deals with companies be subject to provisions for ring-fencing. He noted that organizations such as the IMF and even the United Nations Development Programme (UNDP) have expressed similar sentiments.
The World Bank has noted on several occasions that governments which are new to the oil and gas industry are often obsessed with one thing—billions in revenue. With such clouded judgment, issues like adequate ring-fencing provisions quickly fade into the background of nothingness.
More than 80 countries worldwide have paid dearly for such a mistake. (More in this regard can be read by following this link: https://openknowledge.worldbank.org/bitstream/handle/10986/6746/409020PAPER0Fi1C0disclosed0Sept0181.pdf?sequence=1).
