Dear Editor,
The road-show run by Exxon in collaboration with the Govt. of Guyana finally came to Queens, NY on Friday Nov 14th. Similar shows were performed in other centers of Guyanese concentration – Toronto, Miami/Ft Lauderdale, London in the last few years.
It was at a room at Russo-on-the Bay, Queens, NY; about 100 Guyanese attended; Alistair Routledge (President, Exxon-Guyana) and Robert Persaud (Minister, GoG) led the show. Joel Bhagwandin who was featured in all previous road-shows, was notably absent.
The event was billed as a Guyanese Investors forum – to provide information to Guyanese – so they may take advantage of great investment opportunities that go begging in their homeland.
In the interest of full disclosure, I should state here that I am an activist of the OGGN group whose mission can be described in one word: Renegotiation. To engage in activities to expose what we call scams embedded in the oil contract and to pressure GoG to demand renegotiation of a very lopsided contract.
I got a call from a friend who was already at Russo-on-the-Bay telling me Mr. Routledge was there. I thought it was a good opportunity for me to try engaging Mr. Routledge – ask him to explain a few troubling issues about the oil contract. (Only later did I learn it was a meeting by-invite only, so I essentially crashed the event).
When I got there Mr. Routledge had already spoken. Other members of the panel were performing their set pieces. The Emcee allowed questions for 15-minutes – but unfortunately the stage managers chose a few folks at the front. Sitting in the back row, I lost out. I was told another panel would start immediately, after which there would be another opportunity to ask questions. That turned out not to be true. The second panel ran its course and the meeting concluded. Most of the attendees moved over to the food and drinks bar.
I went to the front – and finally got to talk with Mr. Routledge. I asked him why this lopsided contract couldn’t be renegotiated. He said, “…it is not lopsided”. I said, no other PSA has such a low 2% royalty, right next-door Suriname’s provided for a 6.25% royalty. He insisted 2% for Guyana is “fair”. I told him all the money the OCs (three companies) brought in totaled less than $9 billion – and they have long recovered and repatriated that money. So, the business is now run on so-called free money. Most of the 75% of revenues (Cost Recovery) are pumped back into the business, each time it is recorded as fresh capex – and that is a case of Retained Earnings turned on its head. It is a scam. Routledge denied this basic fact. He explained Exxon has yet to “de-risk the project”. I don’t know what he meant – but I said once the “discovery of an 11-billion-barrel reserve was made; there is no risk. He denied this fact – mentioning “geological risks” (maybe he meant earthquakes); he said Exxon was nationalized twice in Venezuela, to which my retort was there is no chance of that happening in Guyana. When I said Exxon has recovered all its initial capex, Routledge said we have to look at “cash flow”. Really? If cash flow was that bad, where did $51 billion dollars come from – the difference between the total $60 billion invested thus far and the initial capex of less than $9 billion?
I raise the issue of Guyana paying Exxon’s taxes out of its profit-share. I said, “how does Exxon dare ask a Host country to pay Exxon’s profits’ tax out of its profit-share and issue TRs stating taxes fully paid?”. That must be another scam embedded in the contract. Mr. Routledge insisted that practice is normal in PSAs.
My conversation with Mr. Routledge lasted no more than 5-minutes. A line had been forming of folks wanting to pose for pictures with the Star of the show. Several Guyanese spoke of Exxon as the Saviour of Guyana. Some guys keep tapping my shoulder saying, “others are waiting in line”.
Let me say, Mr. Routledge was calm, he is tough, he would bold-facedly deny basic facts, he is an able defender/leader of Exxon. He makes a reportedly one-million-dollar salary a year. I would say – for the job he is doing for Exxon, he earns it. I like Routledge, nice man, he would answer your questions – even if he denies basic facts. Even when I say the PSA’s accounting/financial gymnastics are embedded scams, he does not get hostile but continues to speak in a soft voice.
In America there are lots of Sunday talk shows on TV, where CEOs of big companies are literally grilled on topical issues in very respectable dialogues. Guyana’s TV hosts/reporters should employ the same format. This way the dialogues would elicit solid basic facts about this horribly lopsided contract. I have the clear impression Mr. Routledge would oblige.
I continue to believe that Guyana is losing over $100 billion on that 11-billion-barrel reserve in the Stabroek Block because of a contract that came into being through fraud. That fraud is now vigorously defended by Guyana’s Oil Czar Bharat Jagdeo. The narrative both Jagdeo and Routledge are spreading is a false one. Jagdeo and his peons say Guyana makes progress under Exxon. Routledge says Exxon is there to help Guyana develop. A small country with such a small population (750,000) can be rebuilt 20-times over with 1/100 barrels (royalty) and 5/100 barrels (profit-share out). So, rebuilding the infrastructure, making everything shiny and new is not the issue. The issue is Fair Value for Guyana’s nonrenewable natural resource. This is the 21st century, not the era of pennies-a-ton for its bauxite ore when Guyana was a colony. A sovereign, independent country has leverages to pressure Exxon back to the Re-N table. Never mind all the nonsense about the government would be ousted from power or all the geopolitics about the need for US Govt. help to defend the nation against Venezuelan aggression. Exxon is not US Govt. – and these two entities do not collude to oust govts., if Guyana were to dare ask for Re-N to make an oil contract a little bit less unfair. There is collusion to spread fear of bad things will happen, if Guyana’s leaders were to demand Re-Negotiation.
I do not believe President Trump (or any other US President) would move to oust the GoG from power if it were to use its leverages to pressure Exxon back to the renegotiation table to make an egregiously lopsided contract a little bit less lopsided. President Trump should be asked to make a pronouncement on this matter.
A few noteworthy items. Hansa Persaud, who is a professional engineer, told his story of spending a lot of time going down to Guyana and trying to bid for contracts in the oil business. All his time, effort and money were lost. He said, “In Guyana it comes down to who you know; don’t know the powerful folks, bad luck”. And, as if Hansa was trying to warn other would-be investors, another man was waiting in the wings to blunt Hansa’s message. The other man (sorry, I did not get his name) said he went down from London – and got a $42 million contract to supply medical stuff. He said he had no connections with folks at the top. Minister Robert Persaud advised Hansa to keep trying.
I missed Routledge’s speech, but three persons told me Routledge stated that next year the Exxon-led consortium would pay off its Capex (Capital outlays) – and after that Guyana’s profit-share (currently 14.5/100 barrels) would rise. This statement needs explanation. Exxon is still in an expansive phase. Guyana’s outstanding Capex is now at $55 billion – and still rising with every new project. His statement is incomprehensible. What did he mean, no one knows.
Two persons there – Dhanraj Singh and Dr. Roshan Khan – who were part of the road-show team told me $60 billion had been invested thus far in this Guyana project. No one denies this basic fact. But these gentlemen do not seem to realise that the OCs came in with a total of less than $9 billion – so where did the other $51 billion come from? It is really a case of Retained Earning turned on its head – but the key idea here is that Guyana is not a shareholder in this business; CR money pumped back into the business endlessly and recorded as fresh capex is a fraud, anyway you look at it. Only OCs shareholders will benefit from this massive ramp-up from 470,000 bpd to 1.2 million bpd by 2026.
Guyana benefits, yes – but only because of the aggregate barrels times the same royalty rate and fixed 12.5% profit-share. More barrels, more aggregate revenues. It should be obvious to all Guyanese that Exxon is pumping out our reserves at expedited levels, and we are getting the same 14.5 barrels out of every 100. If Mr. Routledge truly believes Guyana’s “take” will increase after next year, he should publish a pro-forma statement (a sort of amortization table) showing how Guyana’s share of barrels would increase year-after-year.