Category: The Road to First Oil

Exxon and partners made more money than God …. er Guyana

It is more than five months since the 96^th. column was published on January 22^nd. of this year. That column summarised the court action brought by citizen Glenn Lall seeking declarations against the tax provisions contained in the 2016 Petroleum Agreement. The respondent named in the action was the Attorney General. But Exxon, which is the largest investor and the Operator (Co-ordinator) in the Stabroek Block could not leave the matter to be settled between a Guyanese and his Government. It sought the Court’s permission to be joined in the action with the unpleasant consequence that the case is now Esso and the Government of Guyana vs. a citizen of Guyana.  

In seeking to convince the Court of its right to be joined in the action, Esso declared that the Petroleum Agreement was “solemnly negotiated with the Guyana Government” and that certain fiscal arrangements made the various Projects “financially feasible and commercially viable.” Solemn for Esso includes bullying GGMC Head Newell Dennison on a trip to the Exxon Campus in Texas which has been repeatedly commented on in my writings on oil and gas, and the arm-twisting of then Natural Resources Trotman’s Ministry into the signing of the 2016 Agreement, so well documented in the Clyde & Company report on the circumstances surrounding the signing of the Agreement.  

It is unfortunate that senior members of the current Administration seem unmindful of the experience of Dennison or the damning indictment of the APNU+AFC in the Clyde & Co. report, regardless of the fact that it involved a major heist of the country’s natural resources by Exxon and its partners.

The citizenry had long lamented the damage which Trotman and the Granger Administration had caused Guyana, through one of the most lopsided petroleum agreements of the modern age.

The extent of that damage has manifested itself in the audited results of the performance of the three members of the Consortium – Esso, Hess and CNOOC – in 2021. They not only show exactly what Esso means by “financially feasible and commercially viable” but also that there is neither shame nor limit to the greed of Esso and its partners. To put it in a nutshell, or rather a simplified Table, Esso and its partners made more money in 2021 from the Stabroek Block than all the money raised by the whole of the Government in 2021, including its takings from oil. Not by a few millions but by billions. The following two Tables put it more starkly than any column can.

Oil Companies income

Table of Income Statements

A brief comment on the item Tax Credit in the Table above. Article 15.4 of the Petroleum Agreement requires that the tax liability computed under the Income Tax Act and the Corporation Tax Act to be paid to the GRA on behalf of the oil company and that “such sum will be considered income of the oil company. The income statements of Hess and CNOOC state that they are subject to Corporation Tax without disclosing that the payment is to be made by the Government of Guyana and that the amount of the tax paid by the Government is considered income of the company! Esso’s financials are simply silent on taxation altogether.

Current year profits would attract tax credits of $78,638 Mn. so that the total earned by the oil companies would be $391,191 Mn, or the equivalent of $1,862 Mn US Dollars, reduced by any set-off of losses. There is however, another unknown element: the tax laws require branches of overseas companies to pay income tax withholding tax of 20% of the after-tax income, other than in the reinvestment in fixed assets or short-term securities. I think that that would more than compensate for any adjustments to the tax credit for prior years unrecovered costs or accumulated losses.  

It would be interesting but unduly optimistic to learn from the Government the exact amount included in the Certificate of Taxes paid issued to the three oil companies under section 15.4 of the Petroleum Agreement.

Government Revenue

Now let us see what Guyana received in the same year from two sources – the National Budget and the Natural Resource Fund.

As noted in the Table above, the total Government revenue in 2021 was $351,544 Mn. of which 76% came from tax revenues and 24% from oil revenues. Some brief points of analysis.

1. Inclusive of tax credits, the oil companies netted in 2021 from their Guyana operations, a total of $393,191 Mn. while the Government earned a gross sum of $351,544 Mn.

• Exclusive of tax credits, the three oil companies earned $314,553 Mn. from petroleum operations while the Government earned in Profit Share $74,479 Mn., a ratio of 4.22: 1.

• The earnings of the three oil companies from petroleum operations were 3.7 times the earnings of the Government from those operations, inclusive of Royalties.

• Part of the disparity in points 2 and 3 is attributable to the recovery of previous years expenses which have now been recovered in full. So much for all the talk about risks and the uncertainties associated with extended timelines. Those expenses were always magnified to justify the give away of the patrimony.  

• The 2016 Petroleum Agreement provides for a 50-50 split of net revenue, between the Government and the Oil Companies. The Consortium is entitled to 50% of Profit Oil and the Government to the remaining 50%. Yet, the Government’s share of Profit Oil is comparable to that of CNOOC which has a 25% interest in the Consortium!   

• It is unknown in recorded history where three companies of a single country accounted for more revenue than the entire Government of that country in any single year.

Conclusion

President Biden said that Exxon is making more money than God. I am not sure about God but what is true is that locally, Exxon and its two partners have made more money net, than their host country was able to earn gross.

Next week we will start reviewing the financials of each of the three companies. That will allow for a more detailed analysis of the income of each of those companies, including any unrecovered costs.

January 21, 2022

Businessman and Newspaper Publisher Mr. Glenn Lall has filed an action in the Guyana High Court challenging key provisions of the 2016 Petroleum Agreement between the Government of Guyana and Esso Exploration and Production Guyana Limited, CNOOC Petroleum Guyana Limited and HESS Guyana Exploration Limited. Mr. Lall, who has waged a crusade against the Agreement, and more recently has been campaigning for an increase from 2% to 50% in the royalty paid on production, is asking the Court to declare a number of the provisions of Article 15 (the Taxation Article), including the following, to be unlawful, null, void and of no legal effect:

• Those granting tax concessions to Affiliated Companies of Esso, Hess and CNOOC. 

• Those granting tax concessions to Sub-Contractors of Esso, Hess and CNOOC.

• The one granting exemption from personal income tax the income earned by expatriate employees of Contractor, Affiliated Companies or Non-Resident Sub-Contractors who are in Guyana for one hundred eighty-three (183) days or less in any tax year. Lall is also claiming that such exemption violates the Constitution of Guyana and the Prevention of Discrimination Act. 

• The provision of the Agreement requiring the Minister responsible for Petroleum to pay the taxes of the oil companies.

• The section 51 of the Petroleum Exploration and Production Act powers to grant the concessions that the Agreement confers.  

• The Petroleum Exploration and Production Act is not a tax Act and any tax waivers, concessions and remissions would run afoul of the Financial Administration [and Audit] Act.

Mr. Lall is also asking the Court to declare as unlawful Order 10 of 2016 which sought to ratify the concessions granted under the Petroleum Agreement. Through his lawyer Mr. Mohamed Ali, Lall is arguing alternatively, that even if the Order is valid, it only applies to holders of licences under a Production Sharing Agreement.

The respondent in the matter is the Attorney General although it is likely that the three oil companies will apply to be joined in the action. The current Government of Guyana which inherited the Agreement from its predecessor has publicly defended the Agreement on the grounds of sanctity of contract. That principle is now being challenged by a more fundamental one: legality, and in one issue, constitutionality.   

This case is only about the tax provisions in the Agreement – not the Agreement as a whole. The basic structure of the Agreement will not be affected even if the Application is successful. Given the centrality of the tax provisions to the Agreement as a whole however, if the Application succeeds, every player in the Agreement – the Government, the oil companies, the sub-contractors and expatriates – will be affected, although the precise dollar impact is indeterminable and the variables too numerous to identify.

Identified below are some of the direct consequences.   

Affiliated Companies and sub-contractors will be directly affected by the following three provisions:

1. Payments to them during the exploration phase for contract work will now attract the 10% withholding tax under section 10 B of the Corporation Tax Act. Since the withholding is creditable against the eventual liability for that year, the consequence is temporal.

• Withholding tax under the Income tax which is now exempt will now become payable on interest, dividends, deemed dividends, remittances of actual and deemed profits.

• Income earned during the exploration phase by Affiliated Companies and sub-contractors who are in Guyana for less than 183 days in any tax year which is now exempt from tax will become taxable.

Expatriates

Expatriate employees of the oil companies, their Affiliated Companies and of Non-Resident Sub-Contractors who are physically present in Guyana for one hundred eighty-three (183) days or less in any tax year whose income is now exempt from tax will become taxable.

The Oil Companies

Apart from facing higher costs from Sub-Contractors, the Oil Companies become subject to:

1.  Withholding tax under the Income Tax Act becomes payable on interest, dividends, deemed dividends, remittances of actual and deemed profits.

• Perhaps most significantly, they will also have to bear the taxes payable by them on their share of Profit Oil.

This is hugely consequential both for the oil companies and the Government. In 2020, Esso reported a loss while its two partners Hess and CNOOC reported total profits of $16,175 million. At the standard applicable rate of corporation tax, and without any tax adjustments for timing differences or losses, those two companies alone would have to pay approximately $4,000 million and a further 20% on branch withholding tax on their after-tax profit, less any amount re-invested. To put it another way, if instead of having the Government pay its taxes, the oil companies now have to pay taxes like the average taxpayer, they would be paying tax at the combined rate of as much as 40% of taxable income. Contrast this with the current regime under which the Government pays the taxes for the oil companies but issues to them a certificate that they have paid taxes in Guyana.

Conclusion

Should the Court rule that the tax Article is indeed unlawful, this would have a huge impact on the economics of the Agreement and result in significantly higher revenues to the country. We can expect the oil companies to fight to protect what then Leader of the Opposition Bharrat Jagdeo described in the NCM as a “contract that would harm us for decades into the future”, accusing the APNU+AFC as having “sold our patrimony”. Logically, the Government should see this case as offering some re-balancing of the Agreement in favour of the people. Its response this time would be particularly interesting.

Finally, the granting of the Application would affect the holders of all similar Agreements. They too will be watching carefully.   

This Article was Published on the 30 July, 2021

The Natural Resource Fund Act is not in operation

Introduction

Thirty months after its passage and assent by President Granger in January 2019, the only thing active about the Natural Resource Fund Act is that it continues to generate controversy. The Act was passed during the lame duck post-NCM administration, a session boycotted by the PPP/C which had successfully brought the No Confidence Motion.

Economist and SN Columnist Dr. Tarron Khemraj recently took the Government to task for its apparent preference for the model of National Oil Fund of Kazakhstan: a country described in a 2020 Freedom House report as a “consolidated authoritarian regime”, where freedom of speech is not respected and whose electoral laws do not provide for free and fair elections. To give some perspective however, that country’s SWF was inspired by Norway’s experience and is therefore not without any redeeming merit.

Oil and Gas Columns 57 and 58 in fact discussed in some detail the concept of the Natural Resource Fund, Guyana’s version of a Sovereign Wealth Fund. Then Finance Minister Winston Jordan was keen to emphasise in the parliamentary debate on the NRF Act that its drafting benefitted from expert international assistance and that it faithfully observed what are referred to as the Santiago Principles which “promote transparency, good governance, accountability and prudent investment practices whilst encouraging a more open dialogue and deeper understanding of SWF activities”.   

There is no argument either about the two most important functions of SWFs: their role in the stabilisation of key macroeconomic variables and the long-term investment of accumulated public savings. About this there should be no real dispute. Nor should the broad objectives be in dispute either: as a savings and investment mechanism; to facilitate diversification and thus avoid the Dutch Disease; and to allow a controlled flow of cash from natural resources into the national budget. As an earlier column had noted, SWF’s have the potential of growing into Sovereign Development Funds. But whether Guyana will ever get there is another matter, based not only on the volatility of oil prices or investment yields but also on the country’s politics which is always partisan and rarely national.

One year after the PPP/C regained power on August 2, 2020 and more than two years after its assent by then President Granger, the Natural Resource Fund Act is not in operation since no date has been appointed bringing it into operation. There is therefore there is no effective or legal requirement that the oil money or any part of it should go into the Account being held in the Federal Reserve Bank of New York. Such a vacuum is dangerous, irresponsible and raises some grave questions.

The Government has three principal options when it comes to the Act – appoint a date bringing it into operation, repealing it with no immediate replacement, or, to give effect to its own preference, repealing and replacing it with a Kazakhstan -type Act. Having not brought the Act into operation for an entire year, it is difficult to see the Government doing so now. And in any case, doing so has implications and consequences: not only to acknowledge and validate an “unlawful Act”, but agreeing to its restrictions on expenditure, which Governments generally regard with disfavour.    

The second option is not only not practical but is likely to cause some concern among the international community. If the Act is repealed with no replacement, the proceeds of royalty and profit oil would go straight into the Consolidated Fund, ready to be spent. That would defeat the whole purpose of inter-generation equity, a foundation principle of Sovereign Wealth Fund. That leaves us with the third option. But that can prove to be a political minefield. There is little in the country that passes for an opposition but Guyanese take their patrimony seriously and for a sizable part of the population oil has now replaced the Kaieteur Falls as our iconic national symbol – for better or worse.

This places the Government in a quandary. It cannot for much longer delay action on the Natural Resource Fund Act which it may want to think is really unlawful, having been passed by a lame-duck Parliament which it felt compelled to boycott. But there is another reason why the Government may not want this Act. Its expenditure controls are considered too restrictive. The President and the Vice-President have already signaled their disfavour with the Act and their preference for the Kazakhstan Model which many argue is too permissive and gives the politicians too much control. To date, the Government has not done any major acts of commission to arouse the ire and anger of the public at large. Having deprived the PPP/C of power for five months, the political opposition lost much credibility, with the corresponding gain going to the PPP/C.

That derived goodwill to the PPP/C is not however inexhaustible. The NRF Act is not only for a single party or a single generation. This contemporary generation owes it to those yet to come to ensure that there are inter-generational savings from oil. The NRF is too important to become a political instrument and must be protected and defended.

Ram’s Note: A number of editing changes were made to this piece subsequent to its appearance in the Stabroek News.

This Article was Published on July 9, 2021

Introduction

The issue of taxation of the oil companies has aroused particular interest ever since it became known that the Government has to find some $5.391 billion to pay the tax liability of the two partners of Esso in the Stabroek Block – CNOOC and Hess – which reported pre-tax profit of the equivalent of $16.175 billion in 2020. For reasons identified in column 90, Esso, the senior partner and Operator of the Stabroek Block, reported a loss to be carried forward for recoupment in future years. Despite the industry’s well-known proclivity for financial engineering and creative accounting, at some point, Esso too will report a profit and will demand that Guyana pay its taxes as well.

Guyanese are not unfamiliar with the gay abandon with which our governments hand out tax exemptions to the powerful, the favoured, and the influential – the latest group to be rewarded with such fortune are shareholders of private hospitals, some of which are known for extortionate charges and dangerously poor service. But what Guyanese find hard to accept is that an agreement can state, as the 2016 Agreement does, that an entity is subject to the income tax laws of Guyana, including the Corporation Tax Act, and yet two paragraphs later, imposes on the taxpayers the burden of paying those taxes. But that is exactly what the 2016 Agreement and similar agreements have done. And which the Fiscal Affairs Department of the IMF, in a 2018 Technical Assistance Report, in a peculiarly didactic style, both asks and answers the questions whether post-tax sharing is unique to Guyana, and whether it has advantages.

Noise and nonsense purveyors 

The report’s authors – Thomas Baunsgaard, Honore Le Luche and Diego Mesa Puyo – are persons whose credentials cannot be summarily dismissed. At least two of them hold high office and would be the very opposite of noise and nonsense agents who according to our learned Professor “collude, connive and conspire to conceal the reality of today’s petroleum sector and pursues (sic) very outdated narratives.”

This column will examine what these distinguished and knowledgeable individuals wrote about “post tax sharing”, their description of the mechanism whereby the tax payable by the oil companies on their share of the profit under a production sharing agreement is paid by the Government out of its share. Here is their answer to their question about uniqueness and advantages:  

“No, this system is used in many producing countries such as Trinidad and Tobago, Azerbaijan and Qatar, just to name a few. Some advantages of the pay-on-behalf-of system is that it provides more certainty on the expected government revenue from oil projects and mitigates tax planning, while offering physical stability for both the government and contractor against changes in corporate tax rates.” 

This must rank as nonsensical a proposition as any that the IMF has published in its name for decades. How one might ask, does this giveaway bring certainty to Government revenue, or prevent tax planning, when the whole idea of pay-on-behalf-of (POB) is all about tax planning – to allow oil companies to receive a certificate issued by the tax authorities of a tax ostensibly but not actually paid by them so that they can claim a tax credit in their home country? And stability for Government? In fact, from all appearances, Budget 2021 does not acknowledge any awareness of this liability by the Government or make any provision for its payment. For the Government to meet this obligation to the oil companies outside of an Appropriation Act would be unlawful and may explain the silence of the authorities on this matter. 

IMF examples

The practical examples given by the IMF Team are only marginally more sustainable than their conceptual logic. The authors are right about Trinidad and Tobago but fail to acknowledge that this is a decades-old legacy which is no longer widely practised, and has never applied in a post-discovery Agreement. With respect to Azerbaijan, the assertion is effectively disputed by one of that country’s academics and by Deloitte, a Big Four Accountancy Firm. In an article in the July 2015 edition of Journal of World Energy Law and Business, Nurlan Mustafayev states that Contractors and sub-contractors are subject to taxes under the country’s Production Sharing Agreements. There is no pre-contract cost, capital expenditure is limited to 50% of gross production and the cost recovery base and taxes are ring-fenced. Deloitte goes further and gives a range of tax rates of 20% to 32% which petroleum operations must pay. They both note that each Agreement is the subject of a separate Act of Parliament and neither mentions the Government of that country settling the oil companies’ tax obligations.

And for Qatar, here is how PWC, another of the Big Four accounting giants, sums up that country’s tax regimes in respect of petroleum operations: “Generally, corporate income tax rate at a minimum of 35% is applicable to companies carrying out petroleum operations…” In fact, Qatar has moved away from Exploration and Production Sharing Agreements (PSAs) to Development and Fiscal Agreements (DFAs).    

The dangers of comparison

While comparisons can be useful benchmarks, they ignore the overall package and relevant local laws at their peril. In the case of Guyana, two such laws are particularly relevant: the Petroleum Exploration and Production Act Cap. 65:04 (PEPA) and the Financial Administration and Audit Act (FAA). Section 51 of the PEPA provides for the modification of four Acts in respect of licensees under a production sharing agreement. The Acts are the Income Tax Act, the Income Tax (In Aid of Industry) Act, the Corporation Tax Act and the Property Tax Act which extends to the Capital Gains Tax Act as well. In violation of section 10 of the PEPA which permits agreements not inconsistent with the Act, the minister went beyond his powers to extend concessions to persons who do not hold such licences, including persons not resident in or carrying on any operation or business in Guyana.   

The Granger Administration which signed the 2016 Agreement, and the PPP/C Administrations before and after it, will have an enormous task of justifying whether and how a modification or inapplicability of a tax law can amount to a reversal of a statutory obligation whereby a tax liability payable to the State ends up with the Government paying that tax. The FAA in particular appears to raise an insurmountable hurdle. It requires any remission, concession or waiver to be expressly provided for in a tax Act or subsidiary legislation. Seems that the oil companies might have thought that the vaguely worded Order No. 10 of 2016 to give effect to the Petroleum Agreement would allow the pay-on-behalf-of trick. But the FAA deals with that as well. It provides that no Order (or other subsidiary legislation) will be valid unless the Act under which the subsidiary legislation is made expressly permits the remission, concession or waiver. The Order is made under the PEPA which does not, even by implication, let alone expressly, permit[s] the POB formula.

Conclusion It seems clear that the taxation Article of the Agreement contains several provisions which do not meet the test of “not inconsistent” with the Act. The Government must surely be aware of this. In the final analysis, it has to decide whether it stands on the side of the law or with Esso and its partners. The choice should be an easy one. But logic and the law never apply to politics in this country, even when it involves substantial revenues to the State.

This Article was Published on July 2, 2021

This final column of this mini-series examining the financial statements of the three Contractors under the 2016 Petroleum Agreement, reviews their balance sheets, sometimes referred to as statement of affairs, as at December 31, 2020. The Table below is designed in a similar fashion as the summary income statement presented in Column 91. The comments on that Table applies to the Balance Sheet summary as well and readers might therefore wish to go back to that Column for a better understanding of this column.

Table

The total value of assets is $1,891 billion (approximately US$9.1 billion), of which $82.9 billion constitutes current assets, while non-current assets account for $1,808.6 billion, (approximately US$8,612 billion). The total “Equity participation” by the oil companies in the Stabroek Block is $1,128 billion (US$5.4 billion). Put simply, 60% of the assets of the three companies is financed directly by the entities. However, given the nature of branch accounts, this sum can be withdrawn at any time.  

Non-current assets

Esso accounts for 51% of non-current assets while Hess and CNOOC share the balance almost equally. Exploration and development assets ($1,727 billion) make up 91% of the total assets of the three entities. Of this, assets owned by the entities account for $1,522 billion (US$724.8) while $205 billion (US$976 million) is leased from third parties, which accounting rules require inclusion on the balance sheet, along with their corresponding liability. Of the owned assets, CNOOC contributes 29%, Hess 28% and Esso 43%, which also accounts for practically all the leased assets.   

Of the three companies, only Esso has any interest in buildings, its financials disclosing net book value of $574 million in buildings and vehicles – a highly unusual combination of two very different classes of assets. More importantly, in violation of the intent of the Companies Act to restrict the ownership of land by external companies, Esso has been awarded a long-term lease of a substantial parcel of land controlled by Ogle Airport Inc. which however, is not separately identified in its financial statements.  

CNOOC and Hess show as non-current assets some $450 billion and $469 billion, including, dubiously Deferred Tax Asset of $4.7 billion and $10.9 billion respectively. Since the 2016 Agreement relieves all three companies from any obligation to pay taxes on profits, the concept of deferred tax does not apply and should be disregarded for accounting purposes, as Esso does.  

Current assets and liabilities

Current assets, comprising mainly of cash ($13.7 billion), receivables ($24.7 billion) and inventory of unsold crude oil ($36.2 billion) account for 4% of total assets. Of the current assets, Esso accounts for 65%, Hess 21% and CNOOC the remaining 14%. Of the $53.99 billion of current assets of Esso, 55% was held in inventory and 20% in accounts receivable. For Hess, 65% of current assets is held in accounts receivable and 35% in inventory. CNOOC holds 77% of its current assets in cash and its equivalent and 22% in receivables.    

If one side of the balance sheet states the assets owned by the companies, the other side is made up of $695.8 billion in liabilities, $67 billion in provisions and $1,128 billion in what Esso describes as Equity contribution and Hess as Capital contributions, both terms being atypical of branches.   

Total current liabilities of the three amounted to $535.7 billion (US$2.6 billion) with CNOOC accounting for 79%, Esso 18% and Hess 3%. The single most significant debt owed by CNOOC is an amount of $406.2 billion (US$1.9 billion) owed to an affiliate. The amount payable during 2021 on leased assets is G$45.0 billion, all by Esso. Other liabilities of the three partners amounted to $84.5 billion of which Esso is shown as owing $50.6 billion, Hess $14.9 billion and CNOOC $19.0 billion.

The joint-venture partners have a total of $67 billion in provision for decommissioning expenses at the end of the project life – possibly 25 years hence. By contrast, there is no provision for any emergency event, such as an oil spill. In this regard, the Agreement provides for the Government to fix any environmental damage if the companies do not promptly do so and to bill the companies for “reasonable costs and expenses” – not for all costs incurred. It is truly ironic that banks, insurance companies and airlines have to give bonds or lodge deposits to secure potential claims against them while oil companies, arguably engaged in the riskiest business of all, has no such obligation.

Hess shows $441 billion (US$2.1 billion) in Capital contribution or 39% of total capital contributed by the entities while Esso shows Equity contribution of $700.5 billion, representing 62% of the value of its assets. Incredibly, CNOOC had negative shareholders contribution, its assets being financed by short-term liabilities owed to an unnamed affiliate. In its 2020 Annual Report, ExxonMobil reports that “In partnership with the government of Guyana, we are efficiently developing these resources while maintaining active exploration to test multiple prospects.”

We recall from Column 91 that Esso’s direct exploration expenses of $18,286 billion (24% of its revenue), excluding the portion of General and administrative expenses of $20.8 billion (27% of revenue) which would also be allocable to its exploration activities. The claim that this is being done in the name of a partnership, not with Hess and CNOOC, but with the Government of Guyana, needs some explanation.   

Conclusion

There is clearly an underlying agreement among the companies which is not available to the Guyanese public. Former Minister of Natural Resources Raphael Trotman might argue, as he initially did concerning the 2016 Agreement itself, that the confidentiality of such agreement is protected by law. There is no legal basis for such a position. And in any case, the financial statements of each of the companies should disclose, in sufficient detail, the nature of the relationship and the company’s rights, responsibilities and obligations. 

Both the principles underlying their preparation and the contents of the financial statements reflect major deficiencies, including non-compliance with accounting Standards, requirements of the law and the Petroleum Agreement under which they operate. Reconciling the statements reviewed in this mini-series and the requirements of the Petroleum Agreement, or with the tax laws, would be a challenging task for those concerned.

Significantly, the Act requires financial statements of external companies, and not just of their Guyana branch which is what has been presented; the annual returns of these companies filed at the Commercial Registry are similarly non-compliant; and the Registrar of Companies was generous, if not careless, in permitting names of external companies which include the word “Guyana”.

These financial statements have vindicated the initial fears expressed about the limitations and weaknesses of the 2016 Petroleum Agreement. Those limitations and weaknesses have been compounded by the multitude of combined fatal deficiencies by the three oil companies in their financial reporting in the first year of oil production, averaging less than 100,000 barrel of oil per day. The opportunities for manipulation will increase correspondingly as production increases by eight and tenfold. It is incumbent on this Administration to separate itself as a partner in the financial shenanigans being perpetrated by the companies, introduce modern petroleum legislation, appoint independent and competent regulators and ensure that our laws are respected.

The Government should expect resolute pushback. The oil companies do not comply with a weak Agreement partly written by them, let alone a regime of regulation meeting international standards.    

Finally, a word of appreciation to the several persons who shared their perspective with me on the last four columns. Next week’s column will respond to the IMF’s defence of the arrangement whereby the Government pays the tax of the oil companies.