A citizen's review of the Petroleum Agreement (Part 1).

The agreement of June 2016 between the Government of Guyana and Esso Exploration and Production Guyana Limited, CNOOC NEXEN Petroleum Guyana Limited and Hess Guyana Exploration Limited (herein referred to as the “Petroleum Agreement”) contains a number of interesting provisions in Article 19 which attempt to ensure that the Contractor (Esso, Nexen and Hess) gives Guyanese preference in terms of employment opportunities.
 
Art 19.2 “Without prejudice to the right of the Contractor to select employees and determine the number thereof in conduct of Petroleum Operations, the Contractor shall require the Operator to employ and contractually obligate Sub-Contractors to employ Guyanese citizens having appropriate qualifications and experience in the conduct of Petroleum Operations in Guyana.”

I must note before commenting on this provision, how happy I am that there are contractual terms in the Petroleum Agreement dealing with this important issue. Having said this, I find it difficult to imagine how the Contractor can be obligated to employ Guyanese without prejudicing their right to select employees. In other words, the provision appears to me to be inherently contradictory. Beyond that, the extent of this obligation is not set out (such as a quota or percentage system) nor is there a consequence for breach (not that I can work out what action constitutes a breach in the first place). Based on my perusal of the Petroleum Agreement no policy document is referred to or incorporated which would shed light on how this provision is to operate effectively. The question arises as to how the Government intends to ensure that this provision amounts to more than just “lip-service”? 

Art 19.3 “ During each year of the term of the Petroleum Prospecting License, or any renewal thereafter the Contractor shall pay to a Government account for the Ministry Responsible for Petroleum the amount of three hundred thousand United States Dollars (US$300,000) for one or more of the purposes mentioned in Article 19.3 (a) through (d). Payments under this Article 19.3 shall be paid directly into bank accounts held and controlled by the Government. Contractor shall verify such bank accounts and the Minister agrees to cooperate, assist and provide Contractor any information it requires to conduct such verification.

(a) To provide Guyanese personnel nominated by the Government with on-the-job training in Contractor’s operations in Guyana and overseas and/or practical training at institutions abroad;
 
(b) To send qualified Guyanese personnel selected by the Government on courses at universities, colleges or other training institutions;
 
(c) To send Guyanese personnel selected by the Government to conferences and seminars related to the petroleum industry;
 
(d) To purchase for the Government advanced technical books, professional publications, scientific instruments or other equipment required by the Government.”
 
Unless I had missed it, there has not been any discussion on this particular provision and, given its impact, there should have been. Several concerns come to mind. Firstly, will the Government be transparent in its plans for the use of these funds? It would appear that everyone agrees that, notwithstanding Guyana’s particular circumstances, the US$18,000,000 signing bonus encapsulated in Article 33 is too low; not to mention, the clandestine manner in which the signing bonus was dealt with; until the Government was pressed into acknowledging its existence. The Government might, therefore, consider redeeming itself by operating in a manner that is completely transparent in regard to this US$300,000 sum. We as citizens must demand this transparency at every turn.
    
Secondly, is US$300,000 enough for these purposes? On the face of it, this figure seems paltry, after all, this is meant to cater for (a) through (d). If this sum were utilized for (b) alone I find it difficult to imagine more than a handful of Guyanese benefiting from it.

Thirdly, what is the status of those persons nominated by the Government who receive training from these funds? Are these people guaranteed employment? Since Art 19.2 seems to suggest that the Contractor’s right to select employees is not prejudiced, it does not appear to be the case.

Art 19.4 “Within sixty (60) days prior to the beginning of each year, or part thereof as applicable, the Contractor and the Minister shall provide a yearly plan for the utilization of qualified Guyanese personnel for the upcoming year. Following the submission of the plan, the Contractor and the Minister shall meet to discuss and consider the effectiveness of the plan. The Contractor shall provide half yearly reports submitted within 30 days after the end of each half-year to the Minister outlining its achievements in utilizing qualified Guyanese personnel during the previous half-year and make appropriate adjustments to the yearly plan to better accomplish the goal of increasing the number of qualified Guyanese personnel available for use by the Contractor in its Petroleum Operations and other entities performing petroleum operations in Guyana.”

This provision appears to be certain in its obligation. Will this yearly plan be made public? Again, the Government can use this opportunity to restore public confidence by demonstrating that a well thought out plan has been proposed.  I cannot think of a legitimate reason why this plan should not be the subject of public scrutiny. Indeed, the Government may be able to use this provision to reopen negotiations on some of the positions, such as the payment of US$300,000, since it speaks to “appropriate adjustments”.

What these provisions need more than anything else are details, and it is the obligation of the Government to continuously barter for a better position for Guyanese. All of this, of course, will mean very little if the Contractors already possess almost all of the employees they need to effectively carry on operations in Guyana. Perhaps of more value to Guyana is Article 18 of the Petroleum Agreement, which is drafted in a similar manner to Article 19, but speaks to an obligation of the Contractor to use Guyanese goods and materials. (see in conjunction with ANNEX D – Pre-Approved and Certified Petroleum Operation Items)

CONCLUSION
While this Petroleum Agreement is intimidating in size, it is not inaccessible in terms of technicality or terminology; it is written in plain English. I encourage everyone to read it and to think of their future in terms of oil and gas. In order to hold our Government accountable and demand transparency, we must be aware of the facts.

​Oil is part of our future, let’s make the best of it.

Author: Joshua Abdool

Joshua Abdool is an attorney who was raised in Guyana but has begun practicing in Trinidad and Tobago. He will always consider Guyana to be home, and is ever optimistic that should Guyana effectively harness its resources, both human and natural, it is poised to lead the Caribbean. He remains passionate about legal issues and believes that unbiased legal analysis is always topical and beneficial to the public. Joshua intends to pursue an LL.M. in Oil and Gas Law in the near future.