Fiscal regime of Stabroek Block PSA too liberal – Dr. Jagdeo

Vice President Dr. Bharrat Jagdeo, today, said the fiscal regime of the Production Sharing Agreement (PSA) between the Government and US oil company ExxonMobil is too liberal and has placed the country at a disadvantage.

Dr. Jagdeo made this statement during his interview on the Kaieteur Radio programme “Guyana’s Oil and You” in response to a question posed about the tax concessions that Exxon benefits from.

The Vice President explained that while the issue may not be fair, particularly to locals competing in the petroleum industry, ExxonMobil is benefitting from the Production Sharing Agreement it signed with the Former APNU+AFC Government.  

“The tax concessions all are enshrined in the PSA. It is almost so egregious that where tax liability falls on the company, often the Government has to pay. So, a lot of the laxity in relation to the oil companies is derived from the PSA,” he said.  

Government has already made it clear that the current PSA relates only to the Stabroek Block, and that future oil companies interested in oil production here will be bound by different guidelines, which will correct the deficiencies in the existing contract.

The Vice President said many sub-contractors hired by Exxon are also benefitting from tax cuts that the “local man does not get.”

He explained that “this is precisely what has to be fixed in this part of the local content policy. It is not because of discrimination. I don’t think GRA is discriminating in favour of this big company. It is just that they are bound by the PSA and it is the PSA in the future that has to change.”

Article 15 of the PSA signed in 2016, states that “no tax, value-added tax, excise tax, duty, fee, charge or other impost shall be levied at the date hereof or from time to time thereafter on the Contractor or Affiliated Companies in respect of income derived from Petroleum Operations or in respect of any property held, transactions undertaken or activities performed for any purpose authorised or contemplated hereunder.”

Dr Jagdeo meanwhile, said the current PPP/C Government has provided up to $40 billion in tax incentives to Guyanese. In its first budget, the Government reduced taxes on machinery, equipment, and imports for several sectors, among others incentives.