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Amid calls from the Opposition and other stakeholders for an extension in the time for scrutiny of the new model Production Sharing Agreement released by government recently, Chartered Accountant, Christopher Ram said there should be a public forum for broad and general consultations.

Writing in his weekly Oil and Gas column in the Stabroek News last Friday, Ram mocked the new agreement which he said retains the old foreign exchange framework. “So much for a progressive, nationalistic model promised by the Government. While I intend to address the Model over the coming weeks, I urge the Government not only to extend the 14-day consultation period but to engage the public in a public forum for broad, general consultations. The draft does have some positive features but repeats some of the major weaknesses of the existing regime,” Ram said.

Meanwhile, only last week this newspaper reported that the Government of Guyana (GoG) has so far ignored the calls from both civil society and the Opposition for the review period on the new draft Production Sharing Agreements (PSA) to be extended. Two drafts, for the deep and shallow water areas, were released two Tuesdays ago marking the commencement of a 14-day consultation. Several members of the public had recommended that the consultation period be extended to cater for a thorough review of the agreements.

This newspaper had reached out to Minister of Natural Resources, Vickram Bharrat on Friday for his position on the calls being made, but received no response. However, Stakeholder Coordinator for the Ministry, Ms. Mikaila Prince had explained, “no change to the timeline has been communicated.” The Opposition at its weekly press conference last week said the contracts should be laid in the National Assembly and be put before a special select committee that allows for the involvement of the Guyanese citizenry in the national conversation. Similarly, environment and democracy advocate, Simone Mangal-Joly in a letter to Natural Resources Minister, Vickram Bharrat underlined the need for an extension to the consultation period.

She said, “Unlike government officials, citizens are not paid employees of the State and can only read such documents during their after-work hours. Fourteen days is also prohibitive when it comes to procuring qualified specialists to provide advice so that citizens and civil society organisations can make informed representation to government.”

Mangal-Joly had also suggested among other things that mechanisms be put in place for all comments on the new draft agreements be made public and for government to produce a plan to report on how public feedback was addressed in the development of the final model agreement. Alfred Bhulai had also made a similar request to the administration. The agreements that will govern the 14 oil blocks presently on auction, has significantly improved terms for the country. In the new oil contract, government has preserved the right to review and approve the budgets for the exploration and development programmes of the oil companies. Such powers are not enshrined in the Stabroek Block PSA or any other existing PSA.

Equally important is the insertion of a new provision that ensures the country is not left on the hook for any of the oil companies’ bills. A new arrangement or demand rather, is that oil companies must also ensure their subcontractors have adequate insurance coverage too. Importantly, the draft agreements state that oil companies will not be allowed to acquire the blocks and sit on their hands for decades. Unlike what obtains in the Stabroek Block PSA, the new draft agreements stipulate that the “contractor, affiliated companies, sub-contractors and individuals who are expatriates shall be subject to the income tax laws of Guyana, including, the Income Tax Act of Guyana (Cap. 81:01) and the Corporation Tax Act of Guyana (Cap. 81:03) and shall separately comply with the requirements of those laws, in particular with respect to filing returns, assessment of tax, and keeping and showing of books and records.” The new PSA has proposed that cost recovery be capped at 65 percent and introduces an increased royalty of 10 percent. In announcing the release of the new model contracts, the Natural Resources Ministry explained that to ensure new investments are governed by a comprehensive framework of international best practices, there will be an overhaul of the 1986 Petroleum Act and Regulations.

Chartered Accountant, Christopher Ram has reiterated his position that the current foreign currency shortage is a fallout from the 2016 Production Sharing Agreement for the Stabroek Block and he said Guyanese should note that the much vaunted Model PSA has essentially retained the old foreign exchange framework, which is the source of the problem.

Writing in his weekly article which appeared in the Stabroek News on Friday last, Ram observed that in Guyana’s fast changing news cycle, the issue of whether or not there is a shortage of foreign currency appears to have receded into the background. That of course, he said does not mean that the temporary problem has been permanently solved. “Official sources maintain the line that there was never a general shortage, that if anything, the problem was restricted to a few of the commercial banks. The rest have their foreign exchange niches – Scotia from petroleum, Demerara Bank from DDL and Agriculture, and  GBTI from Agriculture and Gold. That’s from the supply side. The shortage, if any, comes from several factors on the demand side, including what is perceived in some quarters as Guyana becoming the Cambio and main source of foreign currency for our Caribbean partners, to borrow from a claim made by Ms. Kamla Persad-Bissessar as Prime Minister of Trinidad and Tobago in respect of her own country,” Ram, wrote.

He said the paradox of any shortage in the midst of a petroleum boom is partly explained by the liberal Foreign Exchange Control provisions of the 2016 Petroleum Agreement which allows the oil companies to run their own exchange regime, outside of the national framework. “And here it is worth noting that the regime is enjoyed not only by Exxon’s indirect subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) but also by Hess and CNOOC which have a 55% share in the oil consortium with Esso the remaining 45%,” Ram stated.

He said apart from being the Operator of the Stabroek Block, EEGPL appears to have taken on the role of representative and spokesperson for the other two. He noted that EEGPL is a member of the Private Sector Commission and was represented at the meeting between the PSC and the Bank of Guyana. EEPGL’s representative however, Ram said made no admission, suggestion or undertaking to contributing to any solution. “Indeed, the representative was totally silent, taking in all that was said, no doubt relaying the discussions to his principals. We need to remind ourselves that EEPGL holds a minority interest (45%) in the Stabroek Block with Hess owning 30% and CNOOC the remaining 25%,” the chartered accountant said.

Ram said that, Guyanese must not make the mistake “that it is all down to the oil companies, that the Agreement is the sole cause of the problem or that any fixing of the Agreement would solve all the problems. Rather, if the Model PSA is a signal, it is safe to assume that the Government does not intend to address the issue of foreign exchange – surplus or shortage – but to leave it to the Bank of Guyana and the so-called market. Perhaps the Government has to be reminded that the Bank of Guyana is a statutory creation, bound to act within the policies set by the Government. The central bank does not make policy but only carries out policies set by the Government. Since neither the Governor of the Bank nor the Government has indicated any change in policy on foreign exchange in response to oil, one has to assume that the Government is comfortable with the status quo.”

He said such continued inaction on the part of the Government has grave consequences. “It has become the victim of the Cambios, the tax evaders, the money launderers and the illegal export of the country’s foreign exchange resources, transfer (under)pricing and the faithful adherence to the foreign exchange rules, already limited as they are.”

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Mr. Ram said Government has to get around to managing the economy and to addressing the problems with the economy and the country. He said unless it acts soon, the condition can potentially become totally unmanageable and insoluble. “Maybe the Government fears that necessary action will not be welcome by their friends and supporters but it must surely realise that it has to act in the best interest of the country rather than in the Party’s electoral interest,” Ram stated.

Offering solutions to some of the problems related to foreign currency issue, Ram called for the repeal of the Dealers in Foreign Currency (Licensing) Act by excluding the non-bank cambios which are almost universally personal cambios, impervious to audit or adequate supervision and regulation. These were created for a different era and purpose and have no place in this society. He also called the Issuing of more banking licences, thereby increasing competition among the banks. Ram said too that there is need for strengthening and enforcing the only semblance of transfer pricing rules under the Income Tax Act. “Rigorous enforcement of the laws against those communities of foreigners – regional and international – that rob the revenue of taxes, underpay our workers and take out foreign currency under all forms of guises. We must not hesitate to place the law breakers before the Courts and to apply our extradition laws in appropriate cases. Addressing the large scale smuggling across the extractive sector and not hesitating to make it possible to revoke leases and licences,” he added.

He also called on government to dealing with the gaping weaknesses in the Local Content Act, the review and amendment of the Bank of Guyana Act, and the Immigration Act, strengthen and depoliticise  the Financial Intelligence Unit and SOCU, and ensure that foreign investment means what it says. “After all, if the local economy finances the investment, directly or indirectly, allowing the investor to repatriate both capital and profits, the gains to the economy are significantly reduced. Liberalising the rules for foreign borrowings but subject to thin capitalisation rules,” Ram concluded.

Though Guyana’s blossoming petroleum sector is in desperate need of pruning to ensure the fruits satisfy the needs of the local populace, the country’s leaders have not been hearkening to their respective roles.

This much can be said, particularly about Vice President (VP) Bharrat Jagdeo, who is tasked with management of the local petroleum, according to Attorney-at-Law and Chartered Accountant, Christopher Ram.

Ram in an invited comment on Sunday said he believes the Vice President has been shirking his responsibilities in numerous instances.

He pointed out that only recently the VP told the media that the Environmental Protection Agency (EPA) has been charged with ensuring ExxonMobil supplies a parent company guarantee.

According to Ram, “That is bulls**t. The EPA has nothing to do with insurance. He is refusing to exercise the significant rights and powers that Guyana does still enjoy.”

The Attorney argued, “I think the entire team of people responsible for the oil and gas sector is doing a very poor job. They are not paying enough attention to what the law and what the agreement requires; even the inadequate provisions of the 2016 agreement are not being sufficiently enforced.”

He explained that the 2016 Production Sharing Agreement (PSA) allows for a renegotiation of the oil contract, yet the government seems more inclined to serve the oil companies, rather than the people of Guyana.

“I know the contract and that is why I am so peeved that our representatives are betraying our trust. They prefer to covert with the Americans now than serve the interest of the people of Guyana,” Ram argued.

The Lawyer also dismissed the Vice President’s claim that the People’s Progressive Party (PPP) said it promised to review the oil contracts rather than engage in renegotiating the Stabroek Block deal.

“That is absolute nonsense. Guyanese are not stupid; we know what Jagdeo said and know what he meant. I also know what he told me in private conversation,” Ram challenged.

When it comes to the government using its discretion where permitted in the oil contract, Ram said the judgment of the leaders is completely off. He said the leaders could have inserted a ring-fencing provision; even without bringing Exxon to the table by simply adding a clause to the production licenses granted to the company.

VP Jagdeo is on record saying that this was a sore issue that the PPP would address. His position has however now changed, as the VP argues the need for ‘sanctity of contracts’.

The Attorney said, “I have made this point Ad nauseam that we did not necessarily need a ring-fencing provision [in the contract]. All they [government] have to do is to say that the revenue under any production license cannot be used to exploration purposes. It’s as simple as that. I really do believe that they are not applying themselves.”

Meanwhile, as it regards conducting audits of ExxonMobil, it was recently reported that Jagdeo directed this publication to the Minister of Natural Resources, Vickram Bharrat.

The Minister has never held a press conference and is usually not the first to address such issues. In fact, when Kaieteur News reached out to the Minister, he explained that the VP had already addressed the audits. The Minister was told that Jagdeo directed the question of the audits to him, but he never responded.

On the other hand, Ram believes that the government is not ensuring the oil companies’ financial statements are being prepared to reflect the nature of the expenses to develop the resources.

He said, “I don’t think that the oil companies’ financial statements are provided in the manner in which they ought to be prepared and that’s a blatant and glaring weakness that is being exploited by the oil company. Annex C sets out the order, nature and presentation of expenses and what the government is doing is allowing Exxon and its two partners to get away with all kinds of improper accounting.”

Ram added, “It all began with the pre-contract costs which were grossly inflated. I am really getting aggravated to see how they are screwing up this entire arrangement.”

The Chartered Accountant pointed out that Annex C identifies how expenses are organized and this is how the company should have been reporting their expenses. None of the reports meet the requirement of Annex C he said. Moreover the reports themselves are inconsistent with each other, according to Ram. Due to this, he said Exxon can bill Guyana for items that should not be recovered through Guyana’s oil.

The Attorney observed, “The manner of oversight is so weak that Exxon and the two other companies can probably prepare their accounts however they wish and organize the accounts in such a way that it becomes extremely difficult to carry out an objective and critical review even as the poor oversight allows claims for cost which are not justified in the agreement.

Article was Published on July 16, 2021

Gas to shore project – too many questions yet to be answered

Introduction

Over the past few weeks ExxonMobil has been holding public consultations on an application to the Environmental Protection Agency (EPA) for an Environmental Authorisation for what it describes as a Gas to Energy Project Onshore and Offshore. According to the Project Summary, it includes the construction and operation of a pipeline from the Liza Phase 1 and Liza Phase 2 Floating, Production, Storage, and Offloading (FPSO) vessels to an onshore natural gas liquids (NGL) and natural gas processing plant (NGL Plant). The summary also states that the power plant will be owned and operated by Government of Guyana.

At the same time, the Ministry of Natural Resources is advertising for expressions of interest for what it describes as Gas Related Investments which include:

• Joint participation with the Government of Guyana and Esso in designing or utilising the outputs from an NGL/LPG facility and related facilities.
• Design, construction, and financing of a power plant fuelled by natural gas, where the power will be delivered into the GPL grid.
• Industries that can utilize natural gas for “natural gas driven developments and growth.”

A reasonable reading of the two initiatives is that these are discrete and separate but yet interdependent projects with separate ownership, financing and operations, with their own economic, environmental and financial considerations. Esso is currently engaged in a series of public consultations in which the EPA and the Ministry of Natural Resources play an undefined but over-defensive role. The statutory basis of the consultations however is hazy at best.   

Back to the Agreement

Whether Guyanese is better informed after the consultation is left to be seen, but let us take a step back and look at the provisions of the 2016 Petroleum Agreement on gas. In fact, Column 43 (May 11, 2018) examined and commented on the Article from which this column now borrows. The Agreement provides that Associated Gas produced from any Oil Field within the Contract Area must first be used for the purposes related to the operations of production and production enhancement of Oil Fields, such as Gas injection, Gas Lifting and power generation.

One might be tempted to think that this refers to the purpose for which it is now proposed but this is doubtful. Indeed, power generation could refer simply to the generation of electricity by the FPSO’s and other vessels at the well sites. Further conflicting evidence is found in the Article which requires the Operator to include in the Development Plan of each Oil Field a plan for the utilisation of the Associated Gas. The Article goes on to provide that where there is any excess Associated Gas, the Contractor is required to carry out a feasibility study regarding the utilisation of such excess Gas and to include it in the Development Plan for the Oil Field.

The representative of the Ministry of Natural Resources has confirmed that there is not one but several such Development Plans. That would suggest that Esso has conducted a feasibility study and must have satisfied itself of its economic benefits of development of the gas resources. As a measure of the lack of any ringfencing of costs, the Article provides that all costs and expenses incurred by the oil companies in the product ion and/or disposal of the Associated Gas of an Oil Field and the costs incurred in the feasibility of the utilisation of the excess Associated Gas is Recoverable Contract Costs.

On the other hand, all costs incurred by the Government for the infrastructure and handling of excess Associated Gas not included in an approved Development Plan is at the sole risk and expense of the Government and will not affect the amount of the Cost Oil and Profit Oil due to the Contractor.

Our patrimony is in the hands of the oil companies

Article 12.1 (c) provides that where the Contractor believes that excess Associated Gas of an Oil Field has commercial value, the Contractor is entitled, but not required, to make further investment to utilise such excess Associated Gas subject to terms at least as attractive as those established for Crude Oil in Article 11 dealing with Recoverable Contract Costs. In any case in which the Contractor believes improved terms are necessary for the development of excess Associated Gas, the Agreement requires the Government and the three oil companies to “carry out friendly negotiations in a timely manner to find a new solution to the utilisation of said excess Associated Gas and reach an agreement in writing.” Over what is our patrimony, the Minister can only lay claim if the Contractor confirms to him by Notice to him that it will not include the development of excess Associated Gas in its or their Development Plan. Clearly, that is no longer the case. Esso is in the driver’s seat for gas as well.

This was Published on July 20,2020

The High Court will today deliver its ruling in APNU’s latest case, this time instituted by its Agent Misenga Jones. Let us face reality: this is part of the plan to delay the declaration of the results of the March 2 elections – now a full 140 days since and an incredible 577 days since the December 21, 2018 no- confidence motion (NCM). Once considered scaremongering, the fear that the APNU would not give up power seems to be validated. It is not a series of unconnected events that there were three court cases on the NCM involving the High Court, the Court of Appeal and the Caribbean Court of Justice. And so far, there have been eight cases, including appeals, arising out of the elections: one before the CCJ, two before the Court of Appeal, one before the Full Court and four before the High Court. If the decision today goes against the APNU, it is almost certain that the Court of Appeal and the CCJ will have further work.

Those legal games are not about law, it is about lawlessness. It is not about the fairness of elections, it is about the rigging of elections. It is not about conceding to who or conceding to what. It is a power grab, an electoral coup, the attempted entrenchment of a dictatorship where one group considers itself superior and another inferior.   

For APNU, it is their assertion of perpetual power, the control of state resources and denial of the vote of one out of every two electors in Guyana. Apparently for them only some votes matter. And yet, Guyanese remain remarkably patient, simply wondering if when and how it will end. Fortunately or unfortunately, the same is not true of the international community. They are neither taken in by the ruses and tactics of the APNU, nor possessed of the unlimited patience of Guyanese.

The US State Department has already announced visa restrictions on those engaged in denying democracy in Guyana with the warning that punitive action will be escalated and targets widened. With signals of similar action by regional, hemispheric and international nations and groups, Guyana will find itself not only more isolated than it has ever been but more isolated than any other country in the world – Iran, Syria, Venezuela and Zimbabwe included. 

Five years ago, Granger was touting his decency, honesty and integrity. He came to power the model of an upright individual, intolerant of improprieties, committed to values. Yet, in five relatively short years the path of his Government is littered with constitutional violations, corruption, cynicism, ethnic preferences, waste and extravagance, arrogance and delusion. Those of us who promoted and supported him find it impossible to recognise the David Granger of five years ago. The veneer of virtues has been shattered. With a determination that borders on the irrational, Granger seems willing to take Guyana into that black hole. And yet, not a single institutional member of the Coalition, not even the JFAP, is decent or brave enough to say, to borrow Andaiye’s famous words, “Not in our name”.

They are all it seems, under the spell of Joe Harmon, the master of bravado, the untouchable and above and beyond the law. A lawyer himself, he seems willing to court international notoriety by mocking the threat of sanctions. He clearly is unmindful and uncaring of the consequences of his further acts of recklessness to the country and its people. Time will tell whether he is indeed as invincible and untouchable as he thinks he is. 

For more reasons than one, I do not celebrate sanctions and do believe that problems concerning Guyana should be solved in Guyana. But I do not accept that the theft of an election is a purely domestic matter since it infects and infests all with whom it comes into contact. It is for that reason and that reason alone that I support sanctions. Bullies, cheats and thieves must realise that evil does not pay.

Yours faithfully,

Christopher Ram