Every Man, Woman and Child must become oil minded – Column no. 169
Introduction
Like some of my fellow commentators, I wanted to give the Ali Administration some space following the September 1 elections. In the campaign season leading up to the elections, candidate Ali promised to fix the problems plaguing the embarrassing and gross failure of the operations of the Access to Information Act. Three weeks after, nothing has been done. I am prepared to wait a little longer.
Regarding the natural resources sector, particularly petroleum, the President has reappointed the same leadership team – a decision that has not inspired universal confidence. On the government’s approach to the 2016 Agreement, he has made it clear that he intends to preserve its lopsided, anti-Guyana provisions, which significantly hamper effective contract administration, management, and oversight. The administration has prioritised “sanctity of contract” over “review and renegotiate.” While I was initially prepared to wait and observe, two recent developments in this sector demand immediate attention.
Developments
The first is the announcement by the Ministry of Natural Resources that it has approved the US$6.8 billion Hammerhead project which is expected to produce 150,000 barrels of oil per day, with first oil projected for 2029. The Licence is granted under Deed and is widely available, allowing for a comprehensive analysis by petroleum technologists and engineers. It includes and sets the benchmarks against which operations can be measured.
Readers will recall that the Stabroek Block was awarded to Exxon, CNOOC and Hess under the Petroleum Agreement and Production Act (1986), but this Act was replaced by the Petroleum Activities Act of 2023. The Regulations referenced in the Licence are those of 1986 which must cause some confusion and overlap.
Under these instruments, the Govern-ment has the right to attach conditions to aid better administration. But while the Licence imposes several obligations on the oil companies, it is silent on the two most contentious issues – ring-fencing and insurance.
The second was a statement out of the United States of America that three US lawmakers had written to ExxonMobil CEO Darren Woods demanding answers about perceived “tax evasion” inherent in the same 2016 oil contract that Guyana keeps celebrating. This tells you everything about how seriously these two countries take their revenue base.
The contrast could not be more striking. For Guyana, it was all adolescent excitement, over an unqualified production licence, from which Exxon will reap the lion’s share of revenue. For the USA, it was seven tough questions with an October 23rd deadline. Show us proof or defend the fraud.
Congrats OGGN
The USA development arose from proactive action on the part of OGGN, operating as an NGO in that country with the objective of getting a better deal for Guyana. The same NGO on whom a constitutional office holder in Guyana, secretly moonlighting for Exxon, had “sicked” the IRS, hoping to have it deregistered. Dave Martins might ask, “Who is the patriot and who is the sellout?
The US Senators – Whitehouse, Van Hollen, and Merkley – think that ExxonMobil is using fake Guyanese tax certificates to rob American taxpayers of vast sums of tax dollars each year. They want to know if ExxonMobil actually paid any taxes in Guyana, or whether it is all a huge cross-border scam.
Here is the tax arrangement under Article 15.4 and 15.5 of the Agreement: 1. ExxonMobil prepares tax return → 2. Minister gets money from oil fund → 3. Minister pays ExxonMobil’s taxes to GRA → 4. GRA issues receipt in ExxonMobil’s name → 5. ExxonMobil uses certificate to claim a tax credit in the USA.
In practice, however, the substantive steps set out in 2, 3 and 4 above are not executed, raising grave doubts about the legality of the entire process, of which Exxon, a company not famous for its embrace of high moral and ethical standards, is a willing partner. OGGN has shown persistence and determination in persuading three courageous US senators to expose the grave omissions by the Guyana authorities, and from the US side, Exxon’s and Hess’ willing use of improperly issued tax certificates to obtain vast sums by way of tax credit.
It is incomprehensible that the Government of Guyana, which subscribes to the Santiago Principles, believes that it can succeed indefinitely in violating its own laws and the norms of accountability and transparency. Under the principle of rule of law, being in government does not place you above the law. Rather, it imposes an even higher standard of conduct for acting within the law, to set the standard of good governance, and to enforcement against all citizens and residents.
Exxon’s discomfort
Exxon knows that the tax certificates it presents to the IRS, GRA’s counterpart, have not been properly issued. It scrutinises the local press for negative coverage and cannot feign ignorance of the nature of the tax certificates it receives. Given the several instances in which the government has brought it into schemes that serve their mutual purpose, it may have felt that the rule of law has given way to the rule of power. So much so that John Colling, ExxonMobil’s Vice President and Business Services Manager for ExxonMobil Guyana, felt free to disregard questions from me that go to the essence of his company’s accounting and ethical practices. John may not be aware of the local saying that time is longer than twine – that things catch up on you.
My case against Charles Ramson for his failure to provide me with almost identical information now being sought by the US senators from Exxon’s Chairman Darren Woods will soon come up. Those senators have given Woods a very narrow timeframe to meet their request for answers. Woods will have to respond under threat of the escalation of the matter.
One way or the other, the smoking gun will be activated. It is likely to cause embarrassment and have significant and powerful consequences for both the government and the American oil companies.