Sanctity of Contract Is a Choice, Not a Clause

Sanctity of Contract Is a Choice, Not a Clause

 OPINION BY :Staff Writer –August 2026

Guyana confirmed this week that ExxonMobil has recovered every cent of its $55 billion cost bank. The President still won’t ask for a better deal — and the same contract he calls untouchable is quietly rewritten every time it suits the operator.

On Tuesday, President Irfaan Ali stood before reporters and delivered good news dressed as inevitability. ExxonMobil, he confirmed, has recovered the full US$55 billion it sank into the Stabroek Block. Guyana’s share of profit oil has jumped from 12.5 percent to 39.8 percent. The operation, by every measure that matters to an oil major, is now risk-free.

Asked directly whether risk-free operations might finally be grounds to renegotiate a contract that has drawn criticism since the day it was signed, the President said no. Not because the law forbids it. Not because Exxon has refused. But because, in his words, the “sanctity of contract” forecloses the conversation before it starts.

That framing does not survive contact with the contract itself, with the record of this administration’s own past statements, or with the government’s own selective conduct under the very agreement it now calls sacred.

THE CANDIDATE WHO WOULD RENEGOTIATE

Six years ago, as a presidential candidate, Irfaan Ali held a very different position on the Exxon deal his predecessors had signed.

The shift is not subtle. In 2020, renegotiation was a promise. In 2026, with the single largest justification for renegotiation now sitting in the public record — full cost recovery, reduced risk, a windfall confirmed by Exxon’s own executives — renegotiation is a legal impossibility. Nothing about the contract changed in the interim. What changed is who benefits from calling it untouchable.

ARTICLE 32.1 SAYS OTHERWISE

Chartered Accountant and Attorney Christopher Ram has pointed to the specific clause the President’s framing obscures. Article 32.1 of the 2016 Petroleum Agreement does not prohibit renegotiation. It states that government shall not “require renegotiation of” the agreement without the Contractor’s prior written consent — language that permits renegotiation by mutual agreement, and simply denies Guyana the unilateral right to force it.

As Ram put it: government must “call Exxon to the table and say, look we must renegotiate this contract now.”

That is a negotiating posture, not a legal wall. Energy strategist Anthony Paul, who has advised multiple governments including Guyana’s on oil and gas policy, made the same point in blunter terms: contracts get renegotiated constantly, and companies ask for changes whenever they have, in his words, “the backbone to do so.” Paul cited Tanzania’s renegotiation of a similarly structured deal, under a similarly worded stability clause, as precedent that political will — not legal architecture — is the actual constraint here.

“Every contract presumes some level of justice — and if things have changed materially, and made it more unjust, then there may be a basis for renegotiating.”

— Anthony Paul, energy strategist

A CONTRACT ALREADY REWRITTEN — JUST NEVER FOR GUYANA

The government’s insistence on sanctity of contract would carry more weight if the contract had, in fact, been treated as sacred. It has not.

• Audit deadlines:  The Petroleum Agreement requires Exxon’s cost expenses to be audited within two years of being incurred. That deadline has been extended repeatedly and without public consequence — Guyana’s first cost audit, covering 1999–2017, was completed years late, and the dispute over its US$214 million in flagged overcharges remains unresolved more than five years after the report was delivered.
• The gas feasibility study:  Stakeholders have noted that the agreement’s requirement for a feasibility study on the use of Stabroek’s associated gas resources was never conducted at all — not delayed, not renegotiated, simply skipped.
• The royalty addendum:  An addendum was signed after the fact to clarify that Guyana’s 2 percent royalty would not itself be recovered by the contractor — proof that when a change favours the operator’s clarity or the state’s convenience, amending this “sacred” document is entirely possible.

Sanctity of contract, in practice, has meant sanctity for Exxon’s deadlines and Exxon’s interests. It has never once meant sanctity for Guyana’s audit rights or Guyana’s revenue protections. The doctrine is not being applied. It is being invoked — selectively, and only when the alternative would cost the operator money.

THE REAL COST OF “SANCTITY”: NO RING-FENCING

Nowhere is the price of this selective sanctity clearer than in the single structural defect Ram and others have identified as the most consequential in the entire agreement: the absence of ring-fencing.

Guyana’s Petroleum Agreement treats the Stabroek Block as one undivided cost pool. Every dollar Exxon and its partners spend — on any project, at any stage — drains into the same cost bank and is recovered from the same production stream, at up to 75 percent of monthly output, before Guyana sees its share. There is no requirement that a project’s costs be recovered only from that project’s own revenue.

There is no wall between what is finished and what is still being built.

This is precisely why the announcement that the $55 billion bank has hit zero deserves more scrutiny, not less. The bank did not close. It reset. ExxonMobil’s own Vice President for Business Services, John Colling, confirmed to reporters in June that the cost bank figure reflects spend across the entire consortium portfolio — not merely the four producing projects, but “relevant spend on projects which are being developed.” Uaru’s construction costs have already been flowing into the same pool that just emptied. Whiptail and Hammerhead are next.

Three sanctioned projects — worth a combined US$32.2 billion in announced capital commitments — are now approaching or entering that undivided pool, with no legal partition separating their costs from the profit oil Guyana was just promised. Every new well drilled on Uaru, every dollar spent finishing Whiptail’s FPSO, every cent Hammerhead’s construction requires between now and 2029, is money that can be deducted from production before Guyana’s 39.8 percent share is calculated — exactly as it was for the first four projects, and exactly as it will be until the day, if it ever comes, that this contract requires otherwise.

Ram’s proposed remedy is precise: treat each production licence as its own cost centre, recoverable only from its own output, and cut the recovery ceiling itself from 75 percent to 50 percent — a figure common across comparable producing jurisdictions.

Ring-fencing would not eliminate cost recovery. It would simply stop new developments from resetting the clock on the developments that already paid for themselves. Without it, the 50 percent profit-oil milestone the government is currently celebrating is not a plateau — it is a moving target that every future sanction pushes further away.

WHAT RENEGOTIATION WOULD ACTUALLY ASK FOR

Ram’s full renegotiation framework extends beyond ring-fencing alone, and none of it requires reopening the entire 2016 agreement from scratch:

• A time-limited tax concession:  a tax waiver with a defined sunset — a ten-year exemption running from first oil in December 2019 and expiring in December 2029, rather than the open-ended concession currently in force.
• Royalty escalation:  lifted from 2 percent to at least 6 percent, rising to 10 percent within five years.
• Ring-fencing:  each production license its own cost center, cost recovery drawn only from that project’s own output.
• A lower recovery ceiling:  cut from 75 percent to 50 percent, in line with comparable jurisdictions.
• Decommissioning security:  borne solely by the companies, expressly excluded from cost recovery, and funded in cash held in a Guyana-based account — not a paper undertaking — with guarantees issued by the ultimate parent companies rather than an unnamed affiliate.

None of these require Guyana to act unilaterally, and none require Exxon’s total surrender. Article 32.1 already contemplates exactly this kind of negotiated adjustment. What it requires is a government willing to sit down and ask — something this administration has not done in six years, through a pandemic, a war-driven price spike, three cost audits, and now the very milestone it claims validates its stewardship of the sector.

THE PATTERN THIS FITS

This is not an isolated failure of nerve. It is the same shape this Guardian has documented across the government’s petroleum governance — an audit process running years behind schedule and largely undisclosed, an announced 50 percent profit-oil milestone immediately offset by new projects entering the same undivided cost pool, and now a renegotiation clause the government insists does not exist, dressed up as legal necessity rather than acknowledged as political choice.

Guyana does not need to tear up the Stabroek Block Production Sharing Agreement to get a fairer share of what lies beneath it. It needs a government prepared to use the leverage the contract itself provides — and prepared to say, plainly, why it has chosen not to.

— The Board