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Senegal sets up committee to review all oil and gas contracts
Basil Diomaye Faye, President of Senegal
– Said the move was to ensure the deal was in the national interest
Kaieteur News – While ExxonMobil Guyana Limited (EMGL) and its Stabroek Block partners Hess and CNOOC continue to enjoy tax exemptions and other benefits from Guyana’s unfair deal, foreign oil companies operating in Senegal now face the possibility of the new government revising their contracts to ensure a more equitable distribution of benefits to citizens.
Bharrat Jagdeo, Vice President of Guyana
Senegalese Prime Minister Ousmane Sonko announced on Monday that the government has formally established a committee to review oil and gas contracts signed with multinational companies. The prime minister made the announcement on national television and insisted that a team of experts from the legal, tax and energy sectors would work meticulously to ensure that all legal aspects were carefully reviewed and in line with the country’s national interest, Africa News reported.
Sonko reiterated the government’s ambition to rebalance energy contracts to suit the national interest. In April, Senegal’s newly elected president, Bassirou Diomaye Faye, announced plans to conduct a comprehensive audit of the country’s oil, gas and mining sectors and the terms and conditions set by his predecessor. Reuters reported that the announcement followed a promise during the campaign to renegotiate the terms of oil, gas and mineral contracts with foreign operators in the country.
Senegal officially became an oil and gas producer for the first time on June 11, 2024, when Australia’s Woodside Energy Group announced that its Sangomar project produced first oil near the African country, S&P Global reported. According to the Australian oil and gas company, the first phase of the Sangomar project will produce 100,000 barrels of crude oil, and the project, along with BP’s massive Greater Tortue Ahmeyim (GTA) gas project, could revolutionize Senegal’s economy.
President Fahey has vowed to ensure the country benefits from resources extracted by foreign companies. Fahey’s statement, which seeks change in a country of about 18 million people, stands in stark contrast to comments by Guyana’s Vice President Bharrat Jagdeo, who while in opposition had promised to renegotiate the unbalanced ExxonMobil Guyana Limited (EMGL), a subsidiary of US oil giant ExxonMobil, but later backtracked and denied he had even made such a promise.
Guyana refuses to review deal
In the case of Guyana, the 2016 Production Sharing Agreement (PSA) was signed between the former APNU+AFC government and ExxonMobil. Although Guyanese have long accepted that the agreement is unfair and benefits the oil company more than the country, the PPP/C government has refused to allow ExxonMobil to return to the negotiating table while allowing the oil company to increase production offshore Guyana.
His Excellency Mohammed Irfaan Ali, President of Guyana
Oil was first discovered in 2015, and by December 2019, the block partners began turning to oil production. Since 2015, ExxonMobil and its partners have made more than 30 additional offshore oil and gas discoveries within the Stabroek Block. The government recently revealed that the block holds about 11.6 billion barrels of oil. The three oil-producing projects in the Stabroek Block generate about $1.5 billion in revenue per month. The three projects – Liza One, Liza Two and Payara – can produce more than 600,000 barrels of oil per day. Guyana’s oil production comes from three floating production, storage and offloading (FPSO) vessels: Liza Destiny, Liza Unity and Prosperity. ExxonMobil already has three more projects in the pipeline – Uaru, Yellowtail and Whiptail.
Exxon aims to produce 1.2 million barrels of oil per day from Guyana’s Stabroek Block by 2027. Exxon’s agreement gives Guyana a 2% royalty on the rich resources and agrees that the oil company will recover 75% of its investment and then split the remaining 25%, with Guyana receiving 12.5%. Due to the lack of isolation measures, Guyana will pay for projects that have not yet started production activities.
Notably, the Petroleum Agreement provides that taxes owed by the company are to be paid by Guyana. Clause 15.1 of the Production Sharing Agreement provides that the Contractor (ExxonMobil Guyana Limited) and its affiliates shall not pay any tax, VAT, excise duty, customs duty, fees, charges or import duties on income derived from petroleum operations, property held or transactions, unless otherwise provided in the Agreement. Clause 15.4 also provides that the Minister of Petroleum will pay to the Director of the Guyana Revenue Authority (GRA) an amount equal to the taxes owed by the company. Notably, the Government of Guyana also agreed to issue a receipt to ExxonMobil indicating that it had met local tax requirements, thus avoiding the burden of double taxation.
Jagdeo changes attitude
Three years ago, Jagdeo, who was opposition leader, was emotional, almost angry, in an interview, saying the then APNU+AFC government had “sold” the country to “foreigners” because it failed to take dedicated measures to consolidate profits from the production sharing agreement (PSA) signed in 2016 with US oil giant ExxonMobil.
At the time, Jagdeo assured that this would be a priority when renegotiating contracts when the People’s Progressive Party/Civic (PPP/C) returns to power. “They sold us out to foreigners. The oil companies, every time a new oil field is discovered, our people should feel sad because we are not getting anything. We will renegotiate these contracts because this is not what we want,” Jagdeo said at the time. He added, “When we first started, we persuaded the people (ExxonMobil) to agree. They (the coalition) came to power with 3 billion barrels of proven reserves, they paid no royalties, no taxes, no segregation.”
Soon after assuming office in 2020, the current Vice President not only changed his attitude but also his tone on renegotiating the ExxonMobil contract and getting more benefits for Guyanese. The People’s Progressive Party (PPP/C) has been refuting claims that they promised to renegotiate the Stabroek Block PSA when they were in opposition.
Jagdeo, a key figure in Guyana’s energy policy, has reiterated in press conferences and interviews that the terms of the current contract must be adhered to in order to maintain investor confidence. He has highlighted the economic benefits Guyana has gained from the agreement, including significant revenues and jobs in the oil industry. Jagdeo defended the government’s decision, saying: “We have a production sharing agreement that determines our share of the revenue, so we are constrained.”
As for Guyana’s ninth executive president, Irfaan Ali, he has been adamantly opposed to renegotiating the existing production-sharing agreement. Last year, in an interview with the BBC, Ali acknowledged criticism that the agreement favored ExxonMobil and said, “We did not get the best deal.” Although Ali acknowledged that the agreement had flaws, he stressed the importance of maintaining the sanctity of the contract and insisted, “We cannot go back and renegotiate.”
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