Review over-generous fiscal concessions, tax exemptions in Exxon’s contract - Goolsarran

Review over-generous fiscal concessions, tax exemptions in Exxon’s contract – Goolsarran

Apr 30, 2019 News

Chartered Accountant, Anand Goolsarran

Parliament’s honouring of a convicted terrorist, a Cabinet reshuffle, and headlines about Ministers’ conflict of interest have all dominated the front-pages of daily newspapers and public discourse recently.
But Chartered Accountant, Anand Goolsarran hopes to remind of an issue that will affect the future of all citizens and the next generation to come. That issue relates to the lopsided ExxonMobil contract and the urgent need for it to be renegotiated.
In his recent writings, Goolsarran stressed that the contract has over-generous fiscal concessions and tax exemptions which ultimately shave away significant revenues from Guyana’s national purse.
Goolsarran said, “Ever since the Petroleum Agreement with ExxonMobil’s subsidiaries Esso, Nexen and Hess was made public, we have been calling for the Agreement to be renegotiated to ensure that Guyana gets a better share of the oil revenues which are expected to commence flowing in the first quarter of 2020.”
The former Auditor General continued, “Our assessment of the Agreement is that it is too heavily weighted in favour of the oil giant, especially in terms of royalty, cost recovery, taxation and profit sharing. According to the International Monetary Fund (IMF), there are too many loopholes in the Agreement that if not plugged, could result in Guyana losing significant amounts of revenue.”
He added, “The Agreement provides for Guyana to receive a royalty of two percent which is significantly below what other oil-producing countries are receiving…In countries where ad valorem rates are applicable, the rates vary from eight percent to 20 percent. For example, in Trinidad and Tobago, the royalty rates are between 10 percent and 12 percent while for the United States, the rate is 16.6 percent. Colombia’s royalty rates are between eight percent and 25 percent, while for Brazil and Peru, the rates are 10 percent and five to 20 percent respectively.”
Further to this, Goolsarran reminded that Guyana will receive 50 percent of the share of profits after deducting up to a maximum of 75 percent of recoverable costs from monthly revenues. He pointed out, too, that any excess recoverable costs are to be carried over to the following month.
Because of the difficulty in verifying such costs and perhaps, Guyana’s apparent lack of capacity and technical expertise to do so, Goolsarran said it was suggested that in any renegotiated agreement, the profit-sharing model should be replaced with a revenue-sharing one, as is being done in the case of India.
In the petroleum industry, Goolsarran noted that recovery costs are by far more difficult to verify compared with revenue.
On the basis of the foregoing arguments, Goolsarran reiterated his call for the contract to be renegotiated while reminding that even the U.S. Ambassador to Guyana, Sarah-Ann Lynch, recently stated that Guyana would be within its sovereign right to renegotiate the agreement if it so wishes.

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