Guyana would not need ExxonMobil if it eliminates fuel smuggling

Apr 26, 2018 Features / Columnists, Peeping Tom

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It is believed that if fuel smuggling was to be eliminated overnight, there will be two major implications for Guyana. The first is that there would be long lines for petrol throughout the country. So much fuel is believed to be smuggled into Guyana that any sudden curtailment of this activity would cause major economic disruptions and lead to a shortage of petrol on the market.
The second implication is that the Guyana Revenue Authority would see a significant rise in revenues. This is how great it is believed fuel smuggling is in Guyana.
The Guyana Revenue Authority (GRA) and the Guyana Energy Authority both need to be called to account in relation to fuel smuggling. Both have failed to curtail the incidence of fuel smuggling, with many persons believing that it has gotten far worse, rather than better, since the introduction of the fuel-marking system.
The Guyana Revenue Authority has made only occasional inroads into fuel smuggling. A few cases have been made, but this has failed to break what many believe is a massive fuel smuggling ring undertaken as part of organized crime.
One of the handicaps facing the GRA is the decision to have placed the management of the fuel-marking system under the Guyana Energy Authority. The original plan was to have a multi-agency body deal with this aspect, since each agency would act as a check against corruption in the other agencies. This has not happened, and this has led to incidents whereby the fuel-marking system has been compromised.
A forensic audit conducted on the Guyana Energy Authority (GEA) uncovered major problems with the fuel-marking system. The audit found that the Fuel Marking Division of GEA had a weak internal control system. It found that responsibility for ordering, storing, dispensing and reconciling fuel-marking concentrates being limited to three persons
It also discovered that there was a lack of proper validation of fuel-marking reports for bulk fuel. The audit found that many of these reports were not independently validated. It also uncovered problems with respect to the handling of markers for duty-free fuel.
Reports in the media suggest that private companies and individuals have been granted licences to import fuel. This should never have been allowed given the risks involved. Fuel importation has to be tightly controlled because of safety and revenue considerations.
When both risks are considered, the importation of fuel should have been restricted to the main petroleum-importing companies – Rubis, Sol and Guyoil. No one else should be allowed to import fuel. The government will find that it is much easier to exercise controls on these large companies than having to do so with additional importers.
The second major implication of the overnight elimination of smuggling is in terms of its impact on government revenues. The tax coffers of the GRA would swell considerably if all those who are presently smuggling fuel pay their fair share of taxes.
In fact, if this happens, there would be no need for that ‘chicken feed’ money which Guyana will receive from Exxon Mobil. Guyana can earn more in revenues from smuggled fuel than it would from Guyana’s take of profit oil based on production of 120,000 barrels.
The level of fuel smuggling is believed to constitute an act of organized crime. It is something that the Special Organized Crime Unit (SOCU) and the State Asset Recovery Unit should have been paying attention to, rather than devoting their efforts to trying to create an offence out of someone not selling a property at market value.
SOCU should try selling a property today. It will find that very few buyers are willing to pay market value for properties. The market is sluggish. The unit established to fight organized crime has also ignored the value which developers add to property and the multiplier effect of developing an undeveloped asset.
In the meantime, the GRA and the GEA need to tighten up on fuel smuggling. They must not act prematurely, as one case seems to suggest, in making arrests. A person cannot be deemed to be smuggling unless they would have done some act to have illegally brought the fuel onshore. This is basic criminal law.
The GRA and the GEA need help to close the loopholes which are being exploited by fuel smugglers. The first step would be to revamp the fuel-making system by either placing it under multi-agency control as was originally planned or having the fuel marked prior to importation, with the option of local marking only for duty-free fuel. The second would be to stop issuing new licences for fuel importation, and to indicate that existing licences, other than those of the large oil companies, would not be renewed when they expire. That should give the GEA and the GRA greater control.

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