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Six -to – one is not 50-50 Part 3 – Government’s Litany of Failures

The financial, audit and regulatory weaknesses highlighted in this mini-series make for disturbing reading and raise serious concerns. Matters might have been very different had both the external auditors and the ministerial auditors taken a firmer stance on compliance with accounting standards, the Companies Act and the Petroleum Agreement. Yet these failures pale in comparison with the absence of adequate contract administration by successive administrations. As trustees of the nation’s resources, they have a duty to safeguard them for the benefit of both present and future generations – a responsibility that is consistently neglected.

While the Granger Administration has attracted most of the criticism for saddling Guyana with this deeply flawed contract, the record shows a chain of failures stretching from the 1999 Agreement signed under President Janet Jagan, through its 2016 revision, and into its ongoing administration. These are not isolated errors. They reflect a persistent pattern of weak oversight, lax enforcement, poor transparency, and an undue deference to foreign oil companies at the expense of the national interest. We now turn to the specifics.

First, the excessive acreage granted (Janet Jagan), the questionable acceptance of force majeure (Jagdeo) and the resulting licence renewal (Granger) show there is no single bad decision resulting in our current plight. On the other side of the coin is clear evidence that Exxon has been granted every concession it has sought, undermining the safeguards built into the petroleum legislation, all at the expense of the country.

Second, following the discovery of oil, Exxon secured a new agreement in 2016 as the 1999 Agreement approached expiry. Its legal difficulties were then “resolved” by a Bridging Deed that effectively transformed 2016 into 1999. In the process, Janet Jagan’s 1999 Agreement and David Granger’s 2016 Agreement became conjoined twins, politically and legally inseparable, binding both the PPP/C and the PNC-led Coalition to a petroleum regime that has disproportionately favoured the operators at Guyana’s expense.

Third, the 2016 Agreement included a commitment to pass certain tax exemptions, including a permanent tax concession. Raphael Trotman, then Minister of Natural Resources wrote in a tell-all book that he was assured by the Chief Government Whip that the Opposition Leader would raise no objection. In the event, he did not. The PPP/C is as culpable at the PNC/R in its various incarnations. 

Fourth, after its return to power in 2020, the PPP/C reneged on its repeated commitment to renegotiate the 2016 Agreement and to set up an independent Petroleum Commission.

Fifth, the entire team at the Ministry of Natural Resources appears to lack the commitment, the capacity or the expertise required to oversee the Petroleum Agreement effectively. With any of these qualities, it would not permitted the persistent deficiencies in accounting, reporting, auditing and operational compliance that have marked the Agreement since its signing under the PPP/C and its re-signing under the APNU+AFC Coalition.

Sixth, the Government has been a co-conspirator in non-disclosure with regard to the gas-to-shore project. In 2024, CNOOC volunteered in its financials that it was meeting some of the expenses of that project. When this was highlighted in column #121, such a note was not repeated in 2025. The 2016 Agreement does not allow this. Any gas-related project should be the subject of a separate Agreement.         

The errors of omission and commission are pervasive and systemic. They include:

A. Institutional and governance failures

i) Failure to establish an independent, professional Petroleum Commission.

ii) Failure to maintain a proper institutional separation between regulator and regulated entity.

iii) Failure to learn from the experience of other petroleum-producing countries where weak oversight, cost inflation, regulatory capture and information asymmetry have transformed a blessing into a curse.

B. Contract administration and regulatory enforcement

iv) Failure to scrutinise and transparently approve the pre-contract costs claimed by the contractor.

v) Failure to deal transparently with costs that are not automatically recoverable under the Agreement.

vi) Failure to impose ring-fencing protections when opportunities existed.

vii) Failure to enforce relinquishment provisions.

viii) Failure to ensure full compliance with statutory requirements governing petroleum operations.

ix) Unwillingness to seek adjustment of rental and other nominal annual charges.

C. Reporting, auditing and transparency

x) Failure to establish and enforce adequate standards of petroleum-sector financial reporting. Column 191 highlighted several serious deficiencies in accounting treatment, presentation and disclosure.

xi) Failure to modernise reporting and disclosure requirements as petroleum production, expenditure and revenues expanded exponentially, resulting in a regulatory framework no longer fit for purpose.

xii) Refusal or failure to publish petroleum reports and other information required under the Agreement.

xiii) Failure to conduct timely and effective ministerial audits. Not a single ministerial audit has been completed in what has become a circus of reckless incompetence. It is as though the Administration is insensitive to the financial benefits of proper audits.    

D. Local content and economic participation

xiv) Delayed implementation of a wholly inadequate local content framework.

xv) Permitting the operator to develop and control major elements of the supply chain architecture.

E. Long-term fiscal and environmental protection

xvi) Failure to understand and address the fiscal consequences of decommissioning arrangements.

xvii) Failure to secure robust environmental and financial assurances.

F. Conduct in public disputes

xviii) A consistent pattern of intervening in litigation on the side of the oil companies rather than maintaining the neutrality expected of a government acting in the public interest.

To Guyanese, the greatest disappointment has been the Ali Administration’s abandonment of its promise to put Guyana first. Having inherited an Agreement it rightly condemned, it has chosen not only to defend it, but in important respects to sweeten rather than reform it – all favourable of the oil companies.

Sadly, the inescapable conclusion is that the greatest threat to Guyana’s petroleum future is no longer the Agreement itself – bad as that is. It is the Government’s continuing failure to act with courage, competence, consistency and integrity. The Granger Administration surrendered too much; the Ali Administration is on course to surrender what remains.

Six -to – one is not 50-50 Part 2:

Today continues where Column 190 left off, examining the egregious failures of omission and commission by ExxonMobil, Hess, CNOOC and their auditor, the cumulative effect of which is to present a distorted picture of the economics of their Stabroek Block operations. At the media briefing on EMGL’s 2025 financial statements, John A. Colling sought to explain the gap between the Government’s share of petroleum revenues and that of the oil companies by referring to “petroleum agreement accounting” and a “cost bank”. Yet neither term appears in the 2016 Petroleum Agreement, any annex thereto, or the financial statements of any of the three Stabroek Block partners. Readers sent to the accounts for an explanation will search in vain.

And far from showing seventy-five per cent of revenue going to costs, EMGL’s 2025 accounts show the opposite. Costs, including non-cash charges, amount to less than thirty per cent of revenue, while profit exceeds seventy per cent. Sent to the accounts to find cost recovery, the reader finds disproportionate profits instead.

Three companies, one Petroleum Agreement, one Block, one operator and one audit firm. The accounts should be comparable and consistent. They are not. On matters central to understanding the venture, they disclose different things, omit different things, and sometimes present the same reality in different ways. Where those differences are material, one or more must be wrong. It falls to the auditor who signed all three to explain what will not reconcile.

1 – The basis that will not name itself

EMGL’s basis note states only that its figures represent the company’s “unassigned interest in various Petroleum Agreements”, without identifying either the interest or the agreements. Accounts that do not disclose the very interest being reported fail to tell the reader what they are accounts of. Hess, audited by the same firm in the same year, disclosed its 30 per cent interest in the Stabroek Block in a single sentence. CNOOC, did the same, and a bit more. The information was plainly available; only EMGL withheld it.

The omission affects every figure in EMGL’s financial statements. Every asset, liability, revenue and expense relates to an interest the reader is never told. On that basis alone, the unqualified audit opinion is difficult to sustain.

2 – One tax, one law, three faces

EMGL reports income tax expense of about G$231.6 billion, an effective rate near 19 per cent, yet offers virtually no explanation. Hess provides a full reconciliation and records an effective rate of about 25 per cent. CNOOC records approximately 8 per cent and, alone among the three, discloses that the Government pays its taxes under the Agreement.

One law, one venture, three effective tax rates. No reconciliation between them and, in EMGL’s case, no meaningful explanation at all. The problem is deeper than disclosure. The accounts create the impression that the companies bear a tax burden which, under the Agreement, is borne on their behalf. That is not merely incomplete reporting. It obscures the economic substance of the arrangement.

3 – The depreciation that will not reconcile

EMGL’s income statement records depreciation and amortisation of G$300.8 billion. Note 10 reports depreciation alone of G$431.0 billion. The difference may be legitimate. Depreciation can be capitalised into assets rather than expensed immediately. But the accounts do not bridge the two figures. No reconciliation is provided, no capitalised amount identified, and no explanation offered for the G$130.2 billion difference.

On one of the largest non-cash charges in the accounts, the reader is left to assume what should have been clear and unambiguous.

4 – The decommissioning puzzle

Accounting standards require companies to provide, up front, for the estimated cost of dismantling wells and facilities at the end of their lives. Yet CNOOC, with a 25 per cent interest, reports the largest liability at about G$197.6 billion. EMGL, with a 45 per cent interest, reports about G$102.8 billion and Hess about G$90.1 billion.

The figures may be correct. The accounts do not explain them. Hess and CNOOC disclose the discount rates used in their calculations. EMGL does not, although the valuation depends critically on that assumption. Three companies sharing the same field report markedly different liabilities, using different disclosures and apparently different assumptions, while the largest participant provides the least information.

5 – Hiding the 6:1 mystery

When challenged about the disparity between the companies’ revenues and Guyana’s share, Exxon points to the “cost bank”. Yet that balance appears nowhere in the Agreement and nowhere in the financial statements of any of the three companies.

That omission hides perhaps the most important issue to the financial statements. The balance of unrecovered costs determines how much oil is taken as cost oil before profit oil is shared. It determines who gets what from the Block. Yet none of the companies discloses the balance, its movement during the year, or the amount remaining to be recovered.

The result is that billions of dollars of costs are recorded, but the recovery that explains the disparity is not. The most consequential number in the revenue-sharing arrangement is absent from all three sets of accounts.

The Question the Auditor Must Answer

Directors are responsible for the preparation and the contents of the financial statements; an audit does not relieve them of that burden. Auditors, for their part, are responsible for the contents of the opinion they express on those statements. One omission may be an oversight. Two may be error. Beyond that, the pattern becomes harder to explain. One block, one agreement, one operator and one auditor should produce the most consistent financial statements in the country. Instead, they produce some of the least.

EMGL will not identify the interest on which its accounts are based. It leaves unexplained a G$130 billion difference in one of its largest charges. It discloses no discount rate for a major decommissioning provision. And it omits the recoverable-cost balance that determines how petroleum revenues are shared. These are not defects at the margins. They go to the basis, measurement and understanding of the accounts themselves.

Hess and CNOOC disclosed information that EMGL withheld. Yet all three remain silent on the recoverable-cost balance. And all three present taxation in a way that obscures the economic reality that the State pays their tax.

The big question is not whether every number in the accounts is wrong. It is how accounts containing omissions of such significance came to receive an unqualified opinion. That is a question for the auditor.

This coming Friday, we will look at the growing list of failures by successive governments. Be warned, they make depressing reading.

These columns are offered by Christopher Ram and posted on his blog chrisram.net and are reproduced with the consent of the writer.

Road to First Oil – Every Man, Woman and Child Must Become Oil Minded; Column 190 June 28, 2026

By Christopher Ram

(Kaieteur News) – ExxonMobil Guyana Limited has now filed its financial statements for 2025, and with Hess’s and CNOOC’s already reviewed, we can now do the simple math of comparing the profits earned by and the share of the Government under the 2016 Agreement which holds that the arrangement under which the Government earns the same amount as the combined earnings of the three companies.

We now know that ExxonMobil which holds a 45% interest in the Stabroek Block in 2025 recorded revenue of G$1.713 trillion and a profit before tax of G$1.214 trillion, about US$5.8 billion; after the income tax it is deemed to have paid, it kept G$982 billion, about US$4.7 billion. By contrast, Guyana’s 50% share of profit oil, was G$451 billion, about US$2.1 billion. Exxon’s 45% of 50% is equivalent to 22.5% of the total. Yet, it recorded a profit before tax nearly three times the profit oil earned by the country.

Chartered Accountant and Attorney, Christopher Ram

Taken together, the earnings of the three companies recorded revenue of G$3.59 trillion in 2025 and a combined profit before tax of G$2.52 trillion – about US$12 billion. This means that for every dollar earned by Guyana on its 50% share, the three companies earned about $5.5 in profit. Even more dramatic is that the income tax on the profits of the oil companies was G$474 billion, itself larger than the whole of the nation’s profit oil.

Source: Audited financial statements adapted for consistency

Since the first barrel

Step back to 2020 when production began. From then to the end of 2025 – six years – the three companies had combined revenue of G$12.30 trillion and a combined profit before tax of G$8.58 trillion, or approximately US$41 billion. After the tax they recorded, they kept some G$7.02 trillion. Guyana’s profit oil over the same period was G$1.58 trillion – about US$7.57 billion. Look at the Table above.

The proportion is more than just stark or steady. While the overall average is a “modest” 4.89 times, the oil companies averaged over five and a half times over the past two years. 2020 – the first year of production – was an outlier: the three together earned barely a quarter of Guyana’s opening profit oil. That now sounds like ancient history. Since that heady year, the ratio of oil companies to country has seen that number hover between five and six to one, reaching very nearly six in 2024.

The Natural Resource Fund – Nothing would be left 

There is one more figure, and it should stop the reader. Over the same six years the three companies recorded income tax of G$1.56 trillion – almost exactly the profit oil the nation received, G$1.58 trillion. Whatever numerologists might make of that, it is real – and it is troubling. Article 15.4 of the 2016 Agreement says the State pays the companies’ income tax, and that the appropriate portion of Government’s share of profit oil is “accepted as payment in full” of that tax liability. Contractually, and we know how sacred that is, the oil companies’ taxes are paid from profit oil. Subtract one from the other – G$1.56 trillion from G$1.58 trillion – and the NRF nation is left with G$22 billion. A drop. After it, the Fund holds only the two-per-cent royalty and the interest earned.

This must trouble every Guyanese, told by the politicians that the Fund is a patrimony – a store of wealth held in trust for the generations to come. The PPP/C Fund architecture was sold to us as superior to that of the Coalition established and supported by intelligible rules and ceiling on withdrawals, all protected by a self-reinforcing structure of committees, managers, advisors and Board. The underlying commitment to both present and future generations that there will be enough to transform our country and its patrimony into a cycle of wealth and wellbeing. Sadly, before the ink dries, before even the first generation attains maturity, that architecture has been debunked by the calculations above.

In fact, if the Agreement is applied as written, almost the entire Government’s share of profit oil would be exhausted in discharging the tax obligations of companies representing the two largest economies in the world. This is like an intellectual horror show, self-imposed in an utter surrender of the country’s sovereignty. What is left to set aside for the unborn is the two-per-cent royalty and the interest the balance earns: a thin remnant, not a patrimony. Six years into one of the fastest oil developments the world has ever witnessed, on the Agreement’s own arithmetic, there is nothing of substance to bequeath. An inter-generational fund with nothing to pass between the generations is a mirage, a fool’s hope.

Look at it: only one of two things is true. Either the Agreement has been honoured, in which case the entire profit oil of the country would be gone, or that the Agreement has been violated – big time. Not by the oil companies, but by a Government that claims that the Agreement is sacred, and that says it respects the rule of law. Let us look at the evidence. The audited financial statements of the Natural Resource Fund are there for all to see. The only withdrawal is used as general budgetary support, which itself is a violation of section 16 of the Natural Resource Fund Act.

This then leads to another mystery, itself concealed in another illegality. The mystery is that the oil companies have been issued with tax certificates even though the National Estimates show conclusively that no such payment was made to the GRA. What we are faced with is that a government which does not have the courage to invoke the renegotiation clause in the Agreement, is quite comfortable breaching another of the Agreement’s Articles – all to avoid an inconvenient truth.

Next week, we will look at how the oil companies have played their part – shamelessly and improperly – in this great, big falsehood.