Home Current News Exxon Deal Denies Guyana $55 Billion, Global Witness Says

Exxon Deal Denies Guyana $55 Billion, Global Witness Says

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Exxon Deal Denies Guyana $55 Billion, Global Witness Says(Bloomberg) — Exxon Mobil Corp.’s oil-production contract with Guyana is so heavily weighted in the supermajor’s favor that it will deprive the tiny South American country of some $55 billion over the life of the agreement, according to human-rights group Global Witness.Guyana had a strong bargaining position when the contract came up for renegotiation in 2016 because Exxon had just made a giant offshore oil discovery, but “inexperienced” bureaucrats failed to press for substantially better fiscal terms, Global Witness said in a report titled “Signed Away” on Monday.Government officials were more concerned with a maritime border dispute with Venezuela than negotiating better terms, the group said. Natural Resources Minister Raphael Trotman signed an “exceptionally bad” deal compared with other frontier oil nations, Global Witness said, citing a fiscal analysis by OpenOil, a Berlin-based public-policy researcher.“We have complied with applicable laws at each step of the exploration, appraisal and development stages, anything to the contrary is baseless and without merit,” Exxon said in an email.Trotman declined to comment beyond previous statements in which he said it was in Guyana’s best interests to gain “security in what it had” rather than engage in a protracted renegotiation.Imminent ElectionThe report is likely to re-ignite debate over which political party is best suited to manage the country’s new-found oil wealth just weeks before national elections. The winner of the March 2 vote will lead a country that by the mid-2020s probably will produce more crude per citizen than any other nation in the world.READ: The World’s Newest Petrostate Isn’t Ready for a Tsunami of CashEven for a company the size of Exxon, Guyana is becoming a critical project. Under pressure from investors upset by its poor, long-term stock performance, Chief Executive Officer Darren Woods last week championed the project’s high returns as an example of the fruits of his $35 billion-a-year spending plan.Much of those returns depend on Exxon’s contract with Guyana, which Global Witness says should be renegotiated. Both political parties running in the election Guyana have pledged to uphold all contracts.Risk ProfilesExxon said Global Witness’s conclusions are “misleading.” The group compared Guyana to mature oil-producing countries that have lower risk profiles and failed to acknowledge that the “material economic terms were agreed to in 1999 and remained in effect in 2016,” the Irving, Texas-based company said.OpenOil’s analysis makes “sweeping assumptions” about the economics of future developments that still require appraisal drilling, Exxon said. For its part, OpenOil says Exxon’s Guyana block “yields relatively low government take by almost any standard.”Trotman “failed to represent his country effectively during negotiations, declining to listen to expert advice and under-valuing Guyana’s apparently strong bargaining position,” Global Witness said.Law firm Clyde & Co. has reviewed Trotman’s and the government’s decision making, the minister said by email, without disclosing what conclusions were reached. He said he will seek to have the report made public.(Updates with minister’s comments in fifth, final paragraphs.)To contact the reporter on this story: Kevin Crowley in Houston at [email protected] contact the editors responsible for this story: Simon Casey at [email protected], Joe Carroll, Christine BuurmaFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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