The absence of or rather failure to appoint inspectors and a Chief Inspector was highlighted in last week’s column. The seriousness of that failure lies in the fact that the Chief Inspector is the person with direct responsibility for the administration of the sector, to manage the oil companies, so to speak. The last Administration failed to do so for around twenty years and cannot use as an excuse that oil was not a big deal then. After all, thousands of hectares of potentially mineral rich resources offshore were given out to oil companies which by law should be supervised by the Chief Inspector and inspectors appointed by the Minister. The exploration phase is admittedly light on expenditure but it does give operators exclusive right to carry out prospecting activities in the blocks for which they receive a prospecting licence.
It was therefore careless in the extreme that even after the establishment of a natural resources ministry, the PPP/C made no such appointment. Of course, that gave the Minister extensive influence over the oil operators, which was probably the objective. Then came the APNU+AFC Coalition which has also failed to act a full two years after a significant oil discovery with the likelihood of more to come!
The importance of the role and functions of the Chief Inspector is set out in the following summary of the Petroleum (Exploration and Production) Act and Regulations made under that Act.
For purposes of the Act, the country is divided for purposes of licensing and exploring for petroleum products. It begins with the preparation of a reference map of the geographical area of Guyana divided into blocks. The geographical coordinates and size of every block are also indicated on the map. The map: a) must be published in the Official Gazette, b) placed at any office specified by the Minister and c) forms part of the Regulations. It is the Chief Inspector who is the certifying authority for the maps. In other words, he is involved right up front.
The Chief Inspector keeps a register with the names and addresses of all licencees. The register must also record any interests in or affecting a licence. Applications for any transfer of a licence made to the Minister has to be made to the Chief Inspector. The operator must also furnish the Chief Inspector a vast amount of information as the exploration moves through its various stages, including notification prior to the commencement of drilling of any well of seismic or other geophysical survey: a detailed report on the technique to be employed; estimate of the time to be taken; the material to be used, and the safety measures to be employed.
The Chief Inspector also has responsibility for ensuring that the operator maintains at a local address of which the Chief Inspector is notified, full and accurate records containing full particulars of:
(a) the drilling, sidetracking, operation, deepening, plugging or abandonment of wells;
(b) the strata and subsoil through which wells or sidetrack holes are drilled;
(c) the casing stating the type, joint numbers and lengths thereof inserted in wells, any alteration to such casing and the cementation of such casing;
(d) any petroleum, water and other economic minerals or dangerous substances encountered, and any significant discovery of any mineral, as defined in the Mining Act made; and
(e) the areas in which any geological or geophysical work has been carried out.
The Act does not confer any power on the Chief Inspector to examine those records, a lacuna which the Minister may wish to take note of for action. But these are not all.
The licensee also has to notify to the Chief Inspector of full and accurate accounts of quantities of any crude oil and natural gas won and saved; their grades and gravity; the quantity disposed of by way of sale or otherwise; the consideration received; the name of the person to whom any such quantity was disposed of; the quantity consumed for drilling and other production operations; the quantity refined on his behalf in Guyana; the quantity treated in Guyana and the quantity flared. And such information is not limited to oil but also to liquefied petroleum gases; sulphur or any other minerals; and any other gases, liquids or solids, etc.
These functions ought not to be taken lightly. If the Chief Inspector does his work diligently, the legitimate concerns being expressed might be minimised. Note that the functions cover the entire range of activities from exploration to production and extends to termination as well.
In fairness, it does appear that the Commissioner of the Geology and Mines Commission carries out these functions in the absence of the Chief Inspector. The problem is, what if a court matter arises and a litigant challenges the right of the Commissioner to exercise any of the functions or power of the Chief Inspector.
There are lots of deficiencies in the existing legal framework. But let us at least make sure that the framework such as it is, is applied and enforced.
Next week we will touch on royalties and taxation.