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Dr. Bynoe has set stage for corrupt oil companies to commit fraud – Ram
-insists licence be revoked if costs are overstated
By Kemol King
Attorney-at-law and Chartered Accountant, Christopher Ram believes that Energy Department Head, Dr. Mark Bynoe, has irresponsibly set the stage for corrupt oil companies to defraud the people of Guyana with impunity.
He uttered this reproof after it was revealed that Government has put no penalties in place to punish oil companies for overstatements.
ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), and its partners, Hess Corporation and CNOOC Nexen, make up the first and currently only consortium of companies set to claim billions in recoverable costs for operations offshore Guyana.
Ram told Kaieteur News that when companies like those are informed that no penalties will be levied against them, they may be emboldened to make improper adjustments to costs so they can recover more than is necessary from the sale of Guyana’s oil.
If any of these companies were to overstate costs, it would constitute fraud, Ram pointed out.
“No Government can treat lightly with the question of fraud.”
The Republic of Kenya realised that, and has already put penalties in its Petroleum fiscal regime to punish oil companies for a series of breaches connected to improper statements of costs.
Director, Department of Energy, Dr. Mark Bynoe
Attorney-at-law and Chartered Accountant, Christopher Ram
For late payment of tax, Kenya will charge a penalty of 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. If there is a tax avoidance scheme, the company is charged double the tax avoided.
The Kenyan Government saw that it needed to devise mechanisms to ensure adherence to its strict cost recovery regulations.
While Kenya’s penalties are comprehensive, Ram prescribes much more punitive measures for companies attempting to defraud Guyana of their entitlement.
He said that such fraud would compromise the very heart of the contract which Government has signed with the three companies.
“If [oil companies] were to do that knowingly or recklessly,” the Government should say, according to Ram, “We are terminating your licence.”
“I think it’s that bad,” the Attorney said.
Presently, the only action the Energy Department would take is to refuse to pay the overstatements. IHS Markit Limited, a London-based firm, has already been contracted to audit the billions of dollars the companies hope to recover – in excess of US$10B.
This includes US$460M of costs detailed in the Production Sharing Agreement (PSA) for works done between the first contract’s signage in 1999 and 2016. They are overstated by “at least” US$92M, according to Ram.
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.”
The oil companies are also looking to collect about US$10B from Guyana in the course of two years, in order to pay for the Liza-1 and Liza-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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