President’s oil Advisor says 2% royalty too low

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Presidential Adviser on Petroleum, Dr Jan Mangal at an interactive discussion on Government’s vision for the oil and gas sector with students from the University of Guyana’s Turkeyen Campus on Wednesday posited, among other things, that Guyana’s contract with oil giant ExxonMobil can be renegotiated and the royalty Guyana is receiving is too low compared to global standards.

Dr Jan Mangal and Vice Chancellor, Professor Ivelaw Griffith

His pronouncements have not gone down well with the incumbent Administration, it seems, as The Ministry of the Presidency (MOTP) in a released statement said it is putting on record that “Dr. Jan Mangal, Presidential Advisor on Petroleum, is not authorised to speak on behalf of His Excellency, President David Granger or the Government of Guyana.”

Under the renegotiated 2017 agreement, which was entrusted to Natural Resources Minister Raphael Trotman, Guyana receives two per cent royalty on earnings from ExxonMobil’s oil sales while the US oil giant would not be required to pay taxes on its share of the profits.

Moreover, in addition to sharing 50 per cent of the net profits—profits declared after the initial investments would have been repaid from any earnings.

According to the President’s Petroleum Adviser that is low compared to global standards. He also raised concerns about the system used to negotiate that agreement and also the expertise of the persons doing the negotiating.

“What we can do is look at what are the international norms. Royalty, when you look around, is more between 10 and 20 per cent, not two per cent. Tax is usually 20-30 per cent in some places, the production split of 50-50 is not too bad,” Dr Mangal noted while responding to a student’s question about whether the Government negotiated a fair contract.

“If a process was followed then we would know who was involved, knew their competencies, expertise and that they went there to bat for Guyana. A lot of people in Guyana right now are questioning that,” he added.

The presidential advisor said generally oil companies are very powerful and experts in everything they do and they know how to influence governments but would buckle under public pressure and as such he encouraged Guyanese to engage in “intelligent debates” on the future of its oil and gas sector.

Dr Mangal has a Doctorate in Offshore Geotechnical Engineering from Oxford University and a Bachelor in Civil Engineering from the University of Edinburg. He worked in the marine and oil and gas industries for over 18 years, where he spent 13 of those with US oil giant, Chevron, working on major projects in the USA, West Africa and Asia.

His pronouncements are in line with what the political Opposition has be saying about the renegotiated contract with the oil giant.

Opposition Leader, Dr Bharrat Jagdeo

Leader of the Opposition Dr Bharrat Jagdeo had -after the contract was finally released to the public- flayed the Administration for the less-than-favourable terms it negotiated on the country’s behalf.

According to Jagdeo, the negotiating power had shifted in Guyana’s favour by 2016 having discovered oil and as such, a much more favourable contract for the country could have been garnered.

With such advantage in hand, he added that Government failed in its negotiation with the oil giant, questioning the motive of the negotiating team when it agreed to the terms of new contract.

The Opposition Leader added that while the oil company cannot be faulted, as its duty is to make profits, it is the Government of Guyana that had to have had proper negotiators.

“The DPI has been touting the rental moving from $400,000 to US$1M. The training bonus is now US$300,000 (per year), and the royalty has moved from 1 to 2 per cent, and that $300,000 would be spent on environmental issues. If you add all of that together and you compare these, 2 billion barrels multiplied by US$50 a barrel, you would see its peanuts. And this is what we are told is a positive negotiation.”

In return, Jagdeo pointed out that ExxonMobil received an extension; a favourable clause for the company to retain its terms and relinquish blocks, among other things.

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