Non-existent Chief Inspector assigned major roles in oil industry

Jan 24, 2018 News

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There are several deficiencies in the existing legal framework that is supposed to govern the developing petroleum industry. However, some of the

provisions that are in place to strengthen the industry are not being applied or enforced.
The Production Sharing Agreement (PSA) that the Government of Guyana signed with ExxonMobil makes several references to duties that are to be carried out by the “Chief Inspector.”
For instance, under Article 21 of the contract, the Chief Inspector has a duty to certify fuel imports by ExxonMobil for the purpose of carrying out petroleum operations. The Chief Inspector is supposed to monitor the imports. However, Minister of Natural Resources, Raphael Trotman has failed to appoint a Chief Inspector.
Attorney at Law, Christopher Ram, in his weekly column “Every man, woman and child should be oil-minded” had pointed out that that key requirement of the Petroleum Act has been ignored for at least twenty years.
Ram said, “There is a requirement that the Minister must designate a public officer or any employee of the Guyana Geology and Mines Commission as Chief Inspector and such number of public officers or employees of that Commission, as may be considered necessary for the purposes of this Act, as Inspectors. Such appointments are required to be published in the Official Gazette; my research shows that the last person who was so appointed was Mr. Brian Sucre who died several years ago.”
Ram said that the seriousness of the failure to appoint a Chief Inspector 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.
Ram noted that the People’s Progressive Party/Civic administration did not appoint the Inspector 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.”
He said that it is 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 following is an excerpt from Ram’s article on the Chief Inspector:
“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.”

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