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Kenya penalizes oil companies for inflated costs, other fiscal breaches…
While Guyana would not
The Republic of Kenya has prescribed a series of penalties to be faced by oil companies for breaches of its Petroleum fiscal regime.
Map of Oil Blocks in Kenya (Tullow Oil)
The country, since facilitating the discovery of hydrocarbon reserves in 2012 by Tullow Oil, has kicked into action to ensure that its Petroleum fiscal regime value gets value for its people.
For late payment of tax, the penalty is 20 percent of the amount that was meant to be paid. If the Government encounters that there is a tax shortfall resulting from false or misleading statements, the charge ranges between 20 and 75 percent of the shortfall. It doesn’t end there. If there is a tax avoidance scheme, the company is charged double the tax avoided.
The breaches described are all involved in a range of illicit practices which could be used by corrupt oil companies to falsify costs. The Kenyan Government saw that it needed to devise mechanisms to punish oil companies if they are ever found to be engaging in breaches of the country’s strict cost recovery regulations.
The same cannot be said for its counterpart, Guyana. In fact, the Department of Energy has said that there would be no penalties for overstatements.
ExxonMobil, Hess Corporation and CNOOC Nexen would face no penalties if they are found to overstate the costs that they intend to recover from operations done offshore Guyana. Kaieteur News was informed of this by Director of the Department of Energy, Dr. Mark Bynoe.
He said that the Department would simply refuse to pay overstatements, and that that would be the only action taken by Government to correct any misstatements encountered by IHS Markit Limited, the London-based firm
Director, Department of Energy, Dr. Mark Bynoe
contracted to audit the billions of dollars being claimed.
Oil production is set to start, with Exxon’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) and its partners, Hess Corporation and CNOOC Nexen, looking to claim billions in costs.
The first US$460M of costs detailed in the Production Sharing Agreement (PSA), and concern works done between the first contract’s signage in 1999 and 2016. They are overstated by “at least” US$92M, Attorney-at-Law and Accountant Christopher Ram had found.
International Lawyer, Melinda Janki, had also pointed out an additional set of costs for operations between January 2016 and when the deal was signed on October 7, 2016.
She had said, “The costs for the whole of 2016 were about US$583M and if you apportion it to October, you get roughly US$400M.”
ExxonMobil and its partners are also looking to collect about US$10B from Guyana in the course of two years, in order to pay off for the Liza 1 and 2 field Developments. The costs include US$3.7B for the Liza-1 project, and US$6B for the Liza-2 project.
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