Guyana to lose out on up to US$55 billion from exploitative Exxon deal

By agency reporter
February 4, 2020

Guyana’s Stabroek license – one of the world’s biggest oil finds in years – will cause the country to lose out on up to US$55 billion, according to a new Global Witness investigation based on an OpenOil analysis. Global Witness calls on Guyanese officials to demand a new deal from Exxon.

The report, Signed Away, shows how Exxon’s aggressive negotiations with inexperienced officials led to an exploitative deal that deprives Guyana of billions. Exxon’s original license for the Stabroek oil block – off Guyana’s Caribbean coast – dates back to 1999. However, in April 2016, after Exxon found oil in the block, the company set out to pressure Guyanese officials to sign a rushed, new contract to renew its oil license – knowing that its existing license was running out.

Evidence seen by Global Witness also shows how Natural Resources Minister Raphael Trotman visited Exxon’s Texas headquarters during the negotiations on an all-expense-paid lavish trip, flying first class and eating at the company’s exclusive restaurant.

Exxon’s internal policy states that staff should consider whether gifts to officials may “improperly influence pending business decisions.” Exxon denies any wrongdoing, saying it is “committed to the highest standards of business conduct, and we follow all local laws and regulations.”

Trotman may have also suffered from a possible conflict of interest as he has been close political allies with one of Exxon’s Guyanese lawyers. The lawyer – Nigel Hughes – has denied he represented Exxon on the deal, but admitted that his firm has represented Exxon since 2009 and that he has worked for the company on other matters.

Global Witness does not have evidence that Trotman’s Stabroek negotiations were influenced – unwittingly or otherwise – by his expensive Texas trip or his ties to Hughes. But the relationship between Trotman, Hughes, and Exxon should be investigated.

“Guyana should renegotiate Stabroek to get a better deal and the government must investigate those who approved Exxon’s oil licenses”, said Jonathan Gant, Senior Campaigner at Global Witness. “Our analysis shows that Exxon would likely pay much more in tax if operating in another country. Yet Exxon aggressively pushed a potentially-conflicted official to sign a rushed contract. Guyana should not lose out on this staggering sum – up to US$55 billion. This is money that can save lives and change futures.”

With an annual budget of US$1.4 billion, there is much that Guyana can do with the extra billions in revenue it should get from the Exxon deal. An analysis by OpenOil, commissioned by Global Witness, shows that Guyana would lose out on an average of US$1.3 billion per year.

“People in Guyana have told us that this is money that should be used to meet critical development needs – building schools, roads, and fixing Guyana’s crumbling sea defences”, said Gant. “A full 90 per cent of Guyanese people live along the country’s coast, and estimates put the bill of rebuilding Guyana’s sea wall at US$3 billion.”

In letters to Global Witness and OpenOil, Exxon disputed OpenOil’s findings, saying that they did not account for Guyana’s 'frontier' status as an oil producer. However, the company did not comment on the detail of OpenOil’s fiscal analysis. Trotman also told Global Witness that getting maximum revenues from Exxon was not the government’s main aim and the country needed Exxon to help protect its borders from Venezuela.  Guyana’s Foreign Minister Carl Greenidge argued that any analysis must focus not only on financial data from international oil deals but on Guyana’s strategic considerations and the risk to Exxon of military conflict in the area.

OpenOil studied reports of the financial terms of government oil contracts around the world, including by the International Monetary Fund. These reports show that, based on international data, Guyana is receiving a lower profit share from Exxon than many other international oil deals.

The Stabroek deal is not the only questionable license that Exxon obtained. Evidence seen by Global Witness also shows that the two other Guyanese oil licenses – called Kaieteur and Canje – raise red flags for corruption. They were initially awarded to companies with limited experience that flipped shares of their licenses to Exxon before doing any real work.

The official who awarded Kaieteur and Canje – former Natural Resources Minister Robert Persaud – issued the licenses just before leaving office in 2015 and has shown an extraordinary degree of ignorance about the ultimate owners of the winning companies. The companies who initially obtained Kaieteur and Canje have denied wrongdoing, as have Exxon and Persaud.

“Guyana’s major oil find risks being turned into a curse for the country. While the world seeks to mitigate the effects of the climate crisis – effects that the Guyanese people know so well – the government could use these lost funds from Exxon to build a sustainable economy and infrastructure to protect against the climate emergency”, said Gant.

Global Witness calls on the Guyanese government to:

  • Renegotiate Exxon’s Stabroek license to get the revenues Guyana needs to build a strong economy following the country’s Green State Development Strategy.
  • Ban all drilling and extraction in areas other than the 15 discoveries Exxon has made to help fight the climate emergency.
  • Investigate the process by which the Stabroek license was negotiated.
  • Investigate officials and companies involved in the Kaieteur and Canje licenses to determine if there were any irregularities in the awarding of those blocks.

*Download Signed Away: How Exxon’s exploitative deal deprived Guyana of up to US$55 billion here

* Global Witness https://www.globalwitness.org/en-gb/

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