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From Destiny to Prosperity Part 1.

Introduction

Today’s column begins the review of Trotman’s book From Destiny to Prosperity – the names of two of the first three Floating Storage and Production Offshore vessels (FPSO) in the petroleum operations conducted by the Contractors in the Stabroek Block, the other being Unity. The book explains that the choice of names was intended to reflect Trotman’s assessment of Guyana’s trajectory as a petrostate.

The book has 10 chapters and six appendices over 187 pages, each chapter representing an “individual episode in time and circumstance”. Appendix C is a report submitted to Trotman by Mr. Newell Dennison, the head of the GGMC, of a meeting he and his deputy attended in Texas at Exxon ‘s offices, a couple months before the signing of the 2016 Agreement. While the meeting was intended to be a technical meeting, Exxon not only raised contractual matters, but it also resisted reasonable points raised by the Guyana team. Whether or not it had any instructions to do so, the report by the GGMC team suggests that the team did not clarify that contractual matters were not part of the team’s remit.

Appendix D reproduces a statement by Minister of Foreign Affairs Carl Greenidge delivered on 14 December 2017 in the National Assembly on the issue of the signing bonus. Trotman’s narrative on the signing bonus is addressed more fully later in this review. Interestingly, Greenidge’s speech was delivered two weeks before the government finally released the 2016 Agreement, confirming a signing bonus. That statement is unsparing of this columnist, no doubt for having first exposed the payment of a signing bonus, two months earlier. Because this review is neither about Greenidge nor me, I leave the matter there, for now.

Motive

In a nine-page Preface to the book, Trotman sets out as his motive for writing it, the need for Guyanese to hear from him definitively on certain matters, that he does not set out to apologise but to explain, to give his side, his context, and even his defence to the “lies, half-truths, misunderstandings, misinformation and vile accusations that have been uttered”. In more restrained language, he explains that much of what he wrote is meant to provide the context surrounding the signing of the 2016 Production Sharing Agreement.

Describing his twenty-eight years in public life as both exciting and gut-wrenching, Trotman praises Presidents Hoyte and Granger for their patriotism, leadership and greatness. He explained “The Bahamas encounter” as a brief conversation in that country with Granger in which the latter set out his vision for Guyana and they shared their collective hope of a change from the “dark, divided and dystopian body politic of Guyana”.

Trotman also recalled that at a meeting at the Public Buildings after the 2011 election results had been declared, Granger proposed to Donald Ramotar, president-elect, that all the parties should come together and form a government of national unity. Ramotar recalls such a meeting but not the specifics of such a call.

Trotman acknowledges two mistakes by him that can prove fatal in politics – expecting others to come to his defence, and his failure to respond to critics.

Chapter 1: Becoming a Minister

In chapter one, the writer traces his political pedigree to his maternal grandfather and recounts his own career in public service covering city council, Member of Parliament, Speaker of the National Assembly and leader of the Alliance for Change, which in coalition with the A Partnership for National Unity won the 2015 elections against considerable odds. Describing Guyana’s democracy as poisoned by ethnic tensions and suspicions, Trotman considers himself as fortunate and blessed to have worked with two presidents, Desmond Hoyte and David Granger, who both possessed qualities of humaneness and greatness and from whom he learnt valuable lessons. While crediting David Granger’s integrity, intellect, and deep love for country, he stated that Granger was definitely not a politician.

Trotman acknowledges that it was Moses Nagamootoo who as a fellow UG student, first stirred his latent interest in politics. He also claims that despite having successfully managed the 2015 alongside Joe Harmon, his name was not submitted for a ministerial position under the terms of the Cummingsburg Accord between the APNU and the AFC. Instead, he was tipped to be named as an advisor and then, to his confusion and surprise, he learnt via a telephone call from a secretary that he would be named a cabinet minister with responsibility for the “national patrimony”, a term no doubt the brainchild of President Granger. Yet, by then, he had no call or conversation with the President, and it was Trotman who subsequently asked for a meeting with Granger.

It was only after several months of confusion that he learnt that he was also be responsible for governance issues, part of which was the writing of the code of conduct for ministers and members of cabinet. In a subsequent cabinet reshuffle, the portfolio of governance was transferred to Prime Minister Moses Nagamootoo while Trotman was re-designated Minister of Natural Resources, handing him what he describes as the “poisonous petroleum chalice.”

Chapter two: The Vision

In this , Trotman sets out the APNU+AFC’s vision for the natural resources sector which he credits entirely to President Granger. Granger had defined the Ministry’s role to be “ensuring the responsible exploration and exploitation of natural resources, land management, rivers and the sustainable mack, management of mines, forests and other natural assets.” In a nod to the political culture of Guyana, he discloses that he lost friends and valuable family relationships because of his inability to grant jobs to people without requisite qualifications and those who sought preferential treatment for the award of contracts and mining and forestry concessions.

Trotman claims as two areas of success Guyana’s signing on to the Extractive Industries Transparency Initiative (EITI) for which he gave kudos to Mike McCormack, the GHRA head, and the Youth in Natural Resources programme. In respect of the EITI, he expressed the belief that there were many then who opposed transparency, some of whom “still linger” and are now “more emboldened.” Such serious accusations without examples do an injustice to those who supported transparency.

Chapter 3: Putting Systems in Place

The writer lists the several government agencies for which he had ministerial responsibility, including Forestry, the Gold Board, the GGMC and the EPA, described by him as a” massive responsibility, and admittedly, unwieldly at times.” Of these, he described the GGMC, under which there has long been a Petroleum Unit, as the most difficult to oversee, functioning “almost with a mind of its own”. While claiming that senior officers of the GGMC were capable, he makes the not-too-subtle point that they were also suspicious of, and marginally resistant to change. Trotman also relates his concerns about rumours of impropriety in the GGMC, citing a specific example when he threatened the head of GGMC of calling in the Police over reports of corruption by “some misguided and unscrupulous GGMC officer.”

Another major challenge identified by him as “managing” the miners – over the tension between large and small miners, insufficient land for mining, raiding and illegal mining, and pollution and environmental degradation. The waning influence of the big miners following the discovery of oil was not in any way helped by President Granger’s description of the mined landscape in the hinterland as “abscesses”, and the efforts to assist small miners owing to the influence of Minister Simona Broomes.

Trotman recounts fewer problems with forestry and the gold and diamond sectors, noting the independence he gave chairpersons Mr. Stanley Ming at the GGMC, Ms. Jocelyn Dow at the Forestry Commission and Ms. Jocelyn Williams and later, Mr. GHK Lall at the Gold Board.

Next week’s column will focus on Chapters 4 and 5 – Interaction with Exxon and the 2016 Production Sharing Agreement.

The Shell Company

Introduction

It has been several months since column 108. Yet, when I told a friend that I intended to publish approximately eight columns over the next few weeks, his immediate reaction was the question: what will you say that you have not addressed in the one hundred and eight columns and dozens of letters over the past four years? Not sure what my answer was.

More recently, I have penned letters in the press raising questions about the conduct of Esso, Hess and CNOOC, the three contractors of the Stabroek Block, as well as about their financial reporting. A specific concern I have are the amounts paid to Esso Exploration and Production Guyana Limited (EEPGL) by Shell Exploration and Production Guyana Limited (2009 and 2011) and then by Hess and CNOOC (2014), and how these were accounted for by Esso Exploration and Production (Guyana) Limited, the Contractor under the 1999 Agreement. Until this is cleared up, there will always be concerns about the integrity and propriety of the accounting records of Esso (now ExxonMobil Exploration and Production (Guyana) Limited). My understanding is that those companies made payments to Esso abroad while the amounts paid might have found their way back to Guyana as costs in the local books via inter-company transactions. If this is so, and there are no consequences, then what’s the point of research and writing? I will persist, for the while.

Beginning with today’s piece, over the next few weeks, this Column will address the conduct of another earlier Stabroek Block partner – Shell Exploration and Production Guyana Limited. Like Esso, Hess and CNOOC, Shell chose the branch model to operate their interest in the Stabroek Block. Perhaps because Shell was in and out of Guyana before the discovery of oil, it has attracted very little attention, including by me. I hope that today’s column goes some way to address that omission.

Then in the weeks following, I will do a review of a recent book From Destiny to Prosperity by former Energy Minister Raphael Trotman giving a narrative on his tenure in that capacity. The book also includes the minutes of a meeting of a Parliamentary Select Committee and extracts from the Hansard which dealt with the 2016 Petroleum Agreement. What stands out in the book was Trotman’s rationalisation of the 1999 Agreement. That will make the PPP/C happy.

I will follow up with a review of the new petroleum legislation – the Petroleum Services Act – which replaces in their entirety the Petroleum Act of 1939 and the 1986 Petroleum Explorations and Production Act. It is worth noting at this stage that the new legislation does not affect the 2016 Agreement, or the regulations made under the 1986 Act as these are specifically “saved”, to use the legal term to describe a situation where subsidiary legislation made under a repealed Act is preserved.

Back to Shell

The Shell company – pun intended – was registered as the branch of an external company in 2009, the same year in which it acquired from Esso, a 25% stake in the Stabroek Block. Then in 2011, it acquired a further 25% making it an equal partner with Esso in the Block. In violation of accounting requirements and legal principles the Guyana Esso branch never accounted for the moneys it received from Shell, for its first 25% or the subsequent 25%.

But here is where the situation gets very messy and shows poor oversight. Shell’s investment in the Stabroek Block extended from 2009 – the year in which it registered in Guyana – to 2014, when it ended its participation in the Block. An application for cancellation of its registration was filed in November 2018. Yet, there is not a single annual report or financial statements for the years 2009 – 2018 in the records of the Commercial Registry as the law requires.

It is a stretch to believe that the company would not have known of its filing obligations under Guyana laws. The question then is whether this was a deliberate decision on the part of Shell, and why the Commercial Registry never picked up this grave omission over a period of several years. The question also must be asked whether Shell ever prepared financial statements or filed tax returns as required under tax laws of Guyana. While the Guyanese public would never know the motive behind the decision not to comply, such non-disclosure has facilitated a more serious issue – it did not have to account for the payments it made to Esso for its 50% stake in the Stabroek Block.

The irony of it all, an affiliate of the same Shell branch was contracted in 2019 to sell Guyana’s first three oil lifts!

Conclusion

It is known that after questions were raised about the 2016 Agreement, then Minister Raphael Trotman commissioned an independent study to investigate the circumstances leading up to its signing. The current administration too, has been confronted with several questions concerning the conduct of the oil companies, many of which did not arise under its watch. Trotman has said he would be willing to appear before an independent and competent Commission of Inquiry. Given the PPP/C’s commitment to “better contract administration” it should not hesitate to set up such a Commission from which so many valuable lessons can be learnt.

Next week: From Destiny to Prosperity Part 1.

The Messy Business of Exxon’s Ogle Head Office  – Part 2

Introduction

Part 107 of this column took up the issue of the construction of a Head Office building by Esso Exploration and Production Guyana Limited at Ogle, ECD and asserted that the whole saga is rife with misrepresentation, secrecy, complicity, abuse of power, possible illegality, and a touch of mystery. At issue is the signing of a binding MOU with Ogle Airport Inc. (OAI) for the lease to ESSO of ten acres of land for thirty years, negotiated with Exxon, Esso’s ultimate parent. The only hiccup was that the land was owned by the state under a lease still ten years away from expiry.

OAI’s initial attempt at resolving the problem was to approach  Mr. David Patterson, Minister of Public Infrastructure. He demurred.  Enter Mr. Fix-It, Joseph Harmon, Minister of State who pushed Patterson aside, replacing and issuing a new Lease to OAI, in one of the most sordid abuses of power by the APNU+AFC Coalition. The role of OAI’s chairman and former Private Sector Commission Chairman Michael Correia might not be as decisive or compelling as Exxon’s or Harmon’s, but it was clearly significant.

Ogle Airport- An Overview

Part 107 traced the development of OAI and how the Correia group came to be in control of the country’s second largest airport, a position which it has monetised to such an extent that it has now become the centre of the Correia’s economic empire. While OAI can hardly be considered a financial success, the Correia group, through four of its companies, reports revenue from their operations that dwarfs the revenue of OAI. The four known Correia companies operating at Ogle report revenue of $7,478 Mn. compared with $379 Mn. earned by OAI. Put starkly, for every $1 of revenue earned by OAI, the Correia Group earns $20. Two of these companies, Correia Mining Company Limited and Caribbean Aviation Maintenance Services Limited, engage in major fuel trading activities at Ogle from which they derive a substantial share of the group’s income. This brings into question whether the Airport is being operated in a manner envisaged in the head lease or primarily for the economic interest of members of the Correia family spread across Guyana, Barbados, USA and Canada.    

The original head lease between OAI and the Government provided for an Airport Review Panel which should have met regularly in the first two years and half-yearly thereafter. It appears never to have met while OAI has failed to provide for a Capital Replacement Reserve Fund. (See 4.8 of 2001 Agreement) Sadly, our country’s culture of accountability, transparency and oversight is scanty and it is unlikely that anything will change at Ogle. Like with so many other state assets, the citizenry are seldom the beneficiaries. 

Ogle and Exxon

In his letter bearing the same date as the MOU – 27 July 2017, Michael Correia, apparently oblivious of the duration of its main lease, sought Patterson’s “no objection” for a 30-year lease of non-airside property within the Airport. That letter was quite revealing. It advised Patterson that Exxon had indicated to the airport a desire to operate flights directly from Trinidad, Barbados or Suriname as well as “potential future direct operations from the USA.” It also noted that Exxon had identified the airport as an ideal location to establish its main administrative offices, hence the Memorandum of Understanding. And this is where MP Mahipaul’s question (see Part 104 of this Column) about the recoverability of the cost for construction of the Head Office assumes relevance. Here we have Michael Correia’s letter in conflict with the official position of Esso!

Part 104 of this Column quoted ExxonMobil’s Country Manager Alistair Routledge as stating that “the cost recovery mechanism had been cleared by both the previous and the current administrations”. The question is not whether the cost recovery mechanism was cleared but whether it was legally done. And if it was so clearcut and simple, why did it need two different Ministers to grant the approval. Further questions include whether this clearance was applied for in writing and whether the minister, whoever he was/is, sought legal advice on the request and whether the clearance was given in writing.

I am not aware of any authoritative Oil and Gas texts which consider the administrative function as constituting petroleum operations. But any discretionary power vested in the minister responsible for petroleum can  be used only in petroleum operations. Also of concern is the use of the ten-acre land for the operation of aircraft by Exxon and its subsidiary, and of course the attendant security implications. What seems to be the case is that Exxon was more open to OAI’s chairman, who thereafter played the role of Exxon’s representative, than they were to the Government.

And there lies the other question. No doubt for self-serving reasons, Exxon chose the branch method of operation in Guyana, giving itself immense latitude in accounting and disclosure. But perhaps the only downside is the requirement set out in section 333 of the Companies Act which provides that any such operation shall “have the power to hold land in Guyana as may be authorised by licence of the President.” Would Routledge care to tell Guyanese which of the Presidents issued such a licence.

Bad signs 

To describe the saga surrounding the approval of the cost of Exxon’s head office as recoverable,  the basis and authority for the lease to Exxon, the role of Joseph Harmon, and the operation of the Ogle Airport as messy is an understatement. Ramon Gaskin once famously said, in relation to the transfer of public assets into private hands, that Guyana has had oligarchs long before Russia did.

The conception, and the redirection of the use of the Ogle Airport formerly owned by GuySuCo, has transformed a public facility into a private good. Joseph Harmon’s abuse of powers which he never had, and his collusion with OAI to extend their still-to-be expired lease shows the danger of unfettered powers of politicians over state assets. These dangers and their abuse are not peculiar to one party.

The 2016 PSA, signed by the APNU+AFC in 2016 has been embraced by the PPP/C, which now encourages its supporters to move on. The Ogle Airport lease was signed by the PPP/C, improved by the PPP/C, and done whatever by Joseph Harmon. Both these matters cry out for a thorough investigation, if only to prevent a repetition. Disappointingly, the PPP/C has shown an unwillingness to share information on the 2016 Agreement and is unlikely to review Harmon’s railroading of the pro-Exxon extension of the OAI agreement.

Conclusion

For the next thirty years or more, Ogle Airport, now Eugene F. Correia Airport, a public facility, will be operated mainly for the benefit of a few private sector operators led by the Correia’s, and now Exxon. Exxon was quick to react to Mahipaul’s question on the issue of the recoverability of the building cost as a recoverable cost under the agreement. On the other hand, it has been silent on whether Exxon is properly authorised to hold land in Guyana.

Unless Guyana gets modern petroleum legislation under the supervision and administration of an independent Petroleum Commission, our country will continue to lose out on its fair share of petroleum revenue. Sadly, that does not appear on the horizon. Next column: The 2023 Model Petroleum Agreements.