Guyana needs to stop collecting ‘chicken feed’ from oil sector

Nov 19, 2018 News

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– demand what you deserve,transparency group advises

By Kiana Wilburg

As Guyana makes moves to review the model for its Production Sharing Agreement (PSA), international transparency groups like the Natural Resource Governance Institute (NRGI) is urging the Government to increase the size of signature bonuses it intends to collect for the burgeoning oil sector.
Its call for attention on this issue is premised on the fact that the coalition government collected a mere US$18M signing bonus from American oil operator, ExxonMobil. The NRGI categorically stated, “Guyana needs to stop collecting chicken feed in the form of signature bonuses. It must demand what it deserves…”
The NRGI explained that bonuses, which are one-off payments that may be fixed or negotiated should always be sizeable. In this regard, it noted that in 2006, Angola, which is “not as richly blessed as Guyana” received more than US$1 billion as a top bid in its award of petroleum rights.
NRGI said, “It is important for the Guyanese authorities to bear in mind that bonuses serve to boost the government’s take. And these bonuses need to be sizeable because weak dimensions of the country’s fiscal regime plus poor negotiation skills may result in the country leaving money on the table…And indeed, Guyana did leave considerable money on the table when the contract it renegotiated is examined…”
The Institute continued, “Let it be clear, getting a sizeable bonus is no excuse for not ensuring that you have a comprehensive fiscal regime for the oil sector. Also, the authorities should not think that if they ask for a sizeable bonus, it has any effect going forward on investment or production decisions. Bonuses are neutral once paid…”
NO EXCLUSION
Even though Minister of Natural Resources, Raphael Trotman, had said that the US$18M signing bonus is nondeductible by ExxonMobil, the contract the oil company has with Guyana does not explicitly state so.
This was recently pointed out by Chartered Accountant, Chris Ram.
In his recent writings, Ram noted that Section Three of the Guyana-ExxonMobil contract deals with costs, expenses, expenditures and credits of the contractor.
Ram stated that Section 3.1 itemises the costs, which are recoverable without further approval of the Minister including all costs attributable to the acquisition, renewal or relinquishment of surface rights acquired and maintained.
The Chartered Accountant said, “Minister Trotman has asserted that the controversial signature bonus of US$18 million is non-deductible, without offering any basis in the Agreement. There is no clear exclusion in Section 3.3, which speaks to Costs not Recoverable under the Agreement.”
Ram said that it does therefore seem that a signature bonus constitutes a legitimate cost of acquiring a surface right.
CRIMINAL MATTER
The government’s approach towards the signing bonus has earned it nothing but scathing criticisms. In fact, Ram deemed it to be a criminal matter. He had said that the police must be called in and the Head of State, David Granger, must issue an apology to the nation for the diabolical act committed by his Ministers.
Ram said that the forced admission by the Government, some months ago is a shocking revelation of a conspiracy to deceive the people of Guyana about billions of dollars.
The Chartered Accountant said that there are immediate and longer-term implications of this saga from which Guyana may forever suffer. For the immediate, Ram said it means that Article 216 of the Constitution of Guyana has been knowingly violated.
The Chartered Accountant said, “May I add here that when in Opposition, this Government, and very specifically the AFC of which Natural Resources Minister, Raphael Trotman is now leader, had repeatedly claimed that former Finance Minister, Dr. Ashni Singh, should be taken before the courts on a criminal charge under the Fiscal Management and Accountability Act.
“It is as clear as day to me that those offences have been committed under Section 85 of that Act by more than one person. This is now a criminal matter and the Guyana Police Force should be called in.
“It should be clear that as much as one half of the potential public revenues of this country should not be left in the control of Ministers engaged in criminal and other improper conduct.”
Ram added, “This Administration has disappointingly shown that such standards of common decency, let alone integrity, do not apply to it and its Ministers. So what about the longer term?
“Well, in a significant transaction with ExxonMobil – with which they need to operate on an arm’s length basis – these same Ministers have shown a willingness to engage in a conspiracy of deception on the people of this country.”
Ram said that ExxonMobil has a monopoly of known and established oil production of Guyana for the foreseeable future. He said that those Ministers cannot be trusted to engage any person, let alone an oil giant who knows that the persons who engage and are required to oversee its conduct are compromised and that their conduct borders on corruption.

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