christopher ram, Stabroek News

Every Man, Woman and Child in Guyana Must Become Oil-Minded

By  stabroek news october 27, 2015

Part 21


EITI Admission

That troublesome confidentiality provision in the law and the Petroleum Agreement has once more attracted attention with the announcement that Guyana is now officially the 53rd candidate country of the Extractive Industries Transparency Initiative (EITI). Officially, EITI is aimed at openness around the governance of natural resources and one would have expected that the admission of Guyana was as a result of commitments made by the country concerning such openness. It is difficult to reconcile openness with the refusal to provide the country, the National Assembly or the individual Coalition Partners with any information on the Petroleum Agreement signed by Minister Trotman in August 2016.

Readers of this column are aware of my strong conviction that there was absolutely no reason for a new Petroleum Agreement with Esso and its joint venture partners. The Agreement lasts the entire duration of the Prospecting Licence and the Production Licence so the question or the mystery is the reason for a new Agreement. A source has indicated to me that the reason is not as mysterious as it may seem. Indeed, the explanation offered to me is very simple. The Government of Guyana used the excuse of a new licence to extract a signature bonus, a payment made by a contractor on the signing of an Agreement to take up any given number of blocks. The figure I have been told is twenty million United States Dollars.


The big gap

If this information is accurate the question is to whom was the payment made. While an early Budget is a commendable achievement, the possibility of transactions not being properly and fully accounted for must not be discounted because of the incomplete fiscal year. The Estimates for 2017 has four columns of Revenue – Actual 2015, Budget 2016, Revised 2016 and Budget 2017. Interestingly, the Preface to the 2017 Estimates of Expenditure goes into some explanation on Expenditure, noting that Revised 2016 figures reflect the latest unaudited expenditure of the previous fiscal year. The question as to the accounting for expenditure subsequent to the “latest unaudited expenditure” must be a matter in which the Government’s auditor would be particularly interested. I accept that it is not a matter of direct relevance to an oil and gas column except for any income in the gap period and the absence of information that is free from confusion and distortion.

So here is what the Preface says about revenue or receipts disclosed in Volume 1 of the Estimates: “the Expenditure and Revenue Plan summarises the Current and Capital Expenditure requirements of the Central Government, and forecasts of Revenues” leaving the reader to wonder whether it means latest unaudited revenue plus projected revenue for the rest of the year. That is at best sloppy, and in any case quite dangerous, as it really means very little. It would indeed have been very helpful for the budget people in the Ministry of Finance to identify clearly the last month for which cumulative expenditure is accounted for, the basis for the estimated expenditure for the rest of the year, and provide similar clarity with respect to revenue.


Yes or no?

Here is the question: was Guyana paid a signing bonus on signing of the secret Trotman Agreement, and if so how, when and how is that money accounted for? It would be folly to think that our new found status of EITI membership will lead to any significant enhancement in terms of disclosure and accountability – there is simply no sign of any willingness on the part of this Administration. Indeed, the defining characteristic of the Administration in the petroleum sector is to mislead without actually lying. For example, all the while when Mr. Trotman claimed, wrongfully, that he was hamstrung in what he could disclose under the PPP/C’s 1997 [non-]amendment to section 4 of the Petroleum Exploration and Production Act, he had in fact signed a completely new Agreement in which he was free to make whatever provisions he considered necessary in the national interest to be inserted in his 2016 Agreement. From all indications he did nothing.

To compound his lack of faithfulness to integrity, Minister Trotman has repeatedly claimed that his hands were tied by the former Administration in terms of what could be disclosed. It is truly troubling that our petroleum sector on which so much of our medium term future hangs will suffer from the absence of truth! Hopefully, EITI will take note but then they are generous in the latitude of what they are prepared to tolerate – at least for the early years of any membership. Maybe, the local Transparency International body – TIGI – will take on the responsibility for ensuring adequate disclosure.

There is another dimension to the reported signature bonus. Why would Esso and its other JV partners be willing to make payments to Guyana which they did not need to do? Trotman and they must have known that the number of blocks granted to them by Janet Jagan under the now displaced 1999 Agreement was far in excess of what the law permitted and that those blocks could always be challenged. A cynic might say that US$20 million is a small price to pay to lock in a huge portion of another country’s petroleum resources. In fact, with what we now know that is a real bargain!

Finally, the claim by Minister David Patterson that Janet Jagan gave away all the offshore blocks rings not only hollow but hypocritical now that it has been found out that the APNU+AFC Coalition had an opportunity to correct that error – but was apparently prepared to accept US$20 million to just let it go.

This is both depressing and frightening.

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