disagreed with this contention.
Jagdeo on Wednesday noted that citizens would only incur a debt if the State agrees, beforehand to accept that debt. And in this case, Guyana does not have such an agreement.
“…we don’t owe any money, if they [the oil company] can’t pay it back [investors], then [the investors] can levy on the assets of the company but not on [Guyana’s] treasury or the consolidated fund,” Dr Jagdeo emphasised at a press conference.
The Vice President also said that oil companies can only recover their costs when they start producing oil. As such, even if a company spends millions of dollars searching for oil but they are unsuccessful, they stand the costs alone.
If they are successful, they are able to recover the money they invested through a mechanism known as cost recovery. As per the oil contract, the oil companies operating offshore are able to recover up to 75 per cent of their costs when oil revenues are accumulated.
The remaining 25 per cent of revenues is split equally between the companies and the government; the government also gets an additional two per cent in royalties from total revenues.
EEPGL, Hess and CNOOC are co-venturers in the Stabroek prolific block. They share the costs and profits based on their varying stakes in the projects.
Importantly, Rietema also noted that the co-venturers are required to fund the decommissioning of the offshore projects. This essentially refers to the gradual shutting down of the offshore facilities used to produce oil.
“The decommissioning liability is a responsibility of the contractor group and we are responsible for those.
“There is no debt for the people of Guyana or the government,” the company’s Vice President said.
That process of decommissioning is expected some 20 to 30 years in the future; it is the final stage of oil production.
Even so, the company sets aside an amount for decommissioning costs each year, catered for under the cost recovery mechanism. Currently, the co-venturers are drafting a decommissioning security agreement for that future decommissioning.
