Fleecing of Guyana series… Canje vs Kaieteur red flags

Nov 01, 2020 News

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Kaieteur News – In a series titled ‘The Fleecing of Guyana’, Kaieteur News has been exposing some of the red flags in the Canje and Kaieteur oil Blocks agreements. Here is a recap of articles that have been published, thus far, in this series which will seek to highlight comparions between the two oil blocks.

Canje Block giveaway
1. Canje Oil block award filled with red flags
The Canje Block was awarded by the Donald Ramotar administration on March 4, 2015 days before the elections, to local company, Mid Atlantic Oil and Gas, which was incorporated in 2013 by Hewley Nelson a management professional and Nicholas Chuck-A-Sang, a geologist.
He has served on several public boards, including on the board of the Marriot Hotel’s parent company, Atlantic Hotel Incorporated, appointed to that post in 2017 by the David Granger administration. He is also understood to have dedicated many years of service at the Hand-in-Hand Trust Corporation Inc., even serving as its General Manager.
Chuck-A-Sang, a petroleum engineer currently serves at the Department of Energy, and has a long history of service with the Government, dating back to the early 1990s.
Dr. Edris Kamal Dookie, who was not officially a Director at the time the company received the block, came on later and is the sole shareholder.
Several important details about the Canje Block award have evaded public knowledge, despite the fact that international transparency best practices require that the man on the street be able to access them. The same is true for the circumstances, which followed the award, as the block changed hands. The handling of the Canje is characterized by many red flags which anti-corruption experts say warrant investigation.
2. Canje block owners sold shares six weeks after receiving block
Mid-Atlantic sold away shares in the block, a mere six weeks after it received it. Mid-Atlantic received the block on March 4 and sold stakes to JHI on May 15. The Natural Resource Governance Institute (NRGI) has noted the quick flipping of blocks without having done substantial work, as a major red flag of inquiry into possible corruption. It is notable that the principals of JHI and Mid-Atlantic, Edris Dookie, and the Canadian John Cullen co-founded CGX in 1996. The companies’ directors are also linked in other ways.
Cullen shares prior experience with Dookie. The two men co-founded CGX in 1996. That company has benefitted from several licences, but was never successful in finding oil. Both men have left CGX.
Cullen also directs a company called Jaguar Holdings. This company, Dookie and Scott Young (another of JHI’s directors) all are shareholders in a Canadian company called Oyster Oil & Gas Limited.
Exxon farmed into the Canje in February 2016, becoming the operator with 35 percent of the shares later that year. The sum Exxon paid for its share is unknown. In February of 2018, JHI and Mid-Atlantic also struck a deal with Total, which resulted in Total having a 35 percent stake.

3. Canje block owner incorporated in secrecy jurisdiction
JHI Associates, with a 17.5 percent stake in the Canje block, has managed to stay under the radar due to its incorporation in the British Virgin Islands (BVI), which is a secrecy jurisdiction and tax haven. This is a major red flag for governments that prioritise transparency and mitigation of corruption risks. Companies registered in jurisdictions like BVI have the fortune of withholding financial information from the public about their transactions, and owners.
The company just about sprung up for the purpose of owning the Canje block. Its website, a vague collection of pages on the internet, provides very little information about itself, save and except for its ownership of the block.
It is notable that Mid-Atlantic and JHI planned to share the block even before Mid-Atlantic received it from Guyana.
One year before Mid-Atlantic received the block, JHI completed a “pre- farm-in” with Mid-Atlantic in 2014, according to its website.
It is unprecedented that a company can “farm in” to a block even before the block was even legally signed away, since the host government would have to approve such a farm in.
It was recently announced that BVI will be creating publicly accessible registers of beneficial ownership for companies incorporated there, by 2023. By then, Guyana would have the opportunity to know who benefitted from the sale of its Canje block to ExxonMobil and Total.

4. Canje owner had no assets, proven track record, finances to acquire Canje block
Located 180km offshore Guyana, the Canje block lies in ultra-deep water. There are only a handful of companies in the world with the capability and track record to drill in ultra-deep water, including ExxonMobil, Royal Dutch Shell, Chevron, BP and Total. Mid-Atlantic is not one of them. This is why, immediately after it was awarded the block, the company started to sell off stakes.
Mid-Atlantic doesn’t even have a stable office space or website, despite it being seven years since it was incorporated, and five years since it received the Canje block. The directors who incorporated the block have no experience in oil and gas. Its shareholder, Edris Dookie has very limited experience drilling for oil, with no finds under his belt. The first company Mid-Atlantic sold to, JHI also does not have what is required. The block only finally went to capable companies starting 2016, after Exxon farmed in. Total farmed in two years later.

5. Guyana lost US$ billions by avoiding open, public tender for Canje Block
Governments around the world make big money when they award oil and gas contracts by open, competitive bidding processes. They also ensure that when such a process is upheld transparently, the best and most eligible companies are chosen to do the job. By refusing to wait, and take the time to study the basin and develop a foolproof open bidding process, Guyana likely forfeited billions of dollars in upfront revenue.
The award was made weeks before ExxonMobil announced its first discovery. Knowledge of this find could have been used in Guyana’s favour. However, the opportunity was forfeited and years later, officials continue to be silent on what transpired.
Guyana’s neighbour Brazil has had many licencing rounds, and its experiences give a glimpse of what Guyana could have gotten if it had put the procurement of its blocks through a competitive bidding process. Brazil has made billions of US dollars from public auctions alone. Brazil typically sets a minimum bonus for the award of certain rights. In one case one year ago, the country set the minimum signing bonus for one block at US$356M. This is because the country knows and skillfully markets the value it possesses, to companies which are capable. The opposite happened when the Canje Block was applied for and awarded. There was no competitive bidding process, and the block was awarded to a company with nothing of value to its name.

Kaieteur Block giveaway
1. Kaieteur Oil Block red flags warrant investigations
The circumstances surrounding the Kaieteur oil block award, made by former President Donald Ramotar, and the subsequent farm-ins, have demonstrated several red flags which warrant a thorough independent investigation.
The block was awarded April 28th, 2015 – just two weeks before the 2015 general and regional elections on the advice of former Minister of Natural Resources, Robert Persaud.
Two companies received the block with 50-50 stakes, Ratio Energy Limited (now Cataleya Energy Limited) and Ratio Guyana Limited.
Ratio Energy was incorporated in Gibraltar on April 15, 2013, and registered in Guyana on October 23rd later that year.
Independent watchdog, Global Witness, said in its damning report Signed Away, that at the time of receipt of the block, the company was owned by an Israeli-based lawyer named Richard Roberts.
Ratio Energy’s name was changed on August 3, 2017 after it received the Kaieteur Block. Its two directors are the Canadian, Michael Cawood and Guyanese, Ryan Perreira, who have experience in mining.
Cawood’s LinkedIn page lists him as Cataleya’s Director and Chief Executive Officer. Pereira’s LinkedIn page lists him as Cataleya’s Director and Co-founder.
Pereira’s Pereira Group has a history of collaboration with Cawood’s Riva Gold Corporation.
In 2010, agreements were announced meant to allow Riva the option to acquire the rights to certain groups of mineral properties in Guyana, specifically gold.
Neither of these men had any experience in oil exploration to talk about, prior to Cataleya’s receipt of the Kaieteur block.
The other initial owner of the Kaieteur block is Ratio Guyana, a subsidiary of the Israeli company, Ratio Petroleum. The parent company has been active in the oil industry for decades.
2. Kaieteur block owners flipped block without doing any work
Just as the owners of the Canje Block flipped the licence without doing any work, the owners of the Kaieteur Block sold a large stake to ExxonMobil without doing what they committed to doing under the contract.
By signing on to the contract, the companies agreed that they would have the technical, managerial and financial competence to carry out the exploration of the ultra deepwater Kaieteur block.
Ratio Energy had no experience in oil and gas prior to receiving the Kaieteur Block. Notably, Pereira has links to both recipients of the Kaieteur Block, as he represented Ratio Petroleum when it received the block in April, 2015 and is now a director in Cataleya.
As for Ratio Guyana, its parent company, Ratio Petroleum has experience in oil and gas. Despite not having the capacity to conduct ultra deepwater drilling, Ratio Petroleum has been in the industry for decades.
Three men: Ligad Rotlevy, Yigal Landau and Yair Rotlevy are the three co-founders of Ratio Petroleum, the company experienced enough to get some of the work done under the Kaieteur Block work programme, but didn’t.
This company held on to the licence for two years following receipt on April 28, 2015.
Cataleya and Ratio Petroleum each sold 25 percent of their Kaieteur Block ownership to ExxonMobil in March 1, 2017.
Global Witness said it gathered from Ratio Petroleum’s website that the companies didn’t even conduct seismic work before ExxonMobil bought its share. It was only months after Exxon bought into the block that the oil major started a seismic survey. Exxon’s work revealed that the Kaieteur Block has an estimated 2.1 billion oil-equivalent barrels.
3. Kaieteur Block owners, like Canje, registered in territory notorious for financial secrecy
The owners of the Kaieteur Block set the stage for secrecy in their acquisition of the by incorporating in a jurisdiction notorious for financial secrecy.
They were incorporated in Gibraltar, a British overseas territory well known and used for facilitating financial secrecy. Kaieteur Block agreement lists both of their registered offices at the same Gibraltar address: Suites 7B & 8B, 50 Town Range.
The two companies sold stakes to ExxonMobil in March 1, 2017. ExxonMobil then sold part of its stake to Hess in April, 2018.The use of secrecy jurisdictions like Gibraltar is what allowed the companies to keep the details of these transactions under the radar. The Tax Justice Network, a Britain-based activist think-tank which researches international tax and financial regulation, produced the 2020 Financial Secrecy Index which ranked Gibraltar as 30th in the world.
The Tax Justice Network found that Gibraltar got the worst score possible for transparency in the areas of public company ownership, public company accounts, and country-by-country reporting. This indicates that the British overseas territory is as secretive as a jurisdiction can possibly be when it comes to these indicators.
4. Despite having oil sector experience, Kaieteur owners were not qualified to develop block
The two initial owners of the Kaieteur Block were not qualified to develop the ultra deepwater Kaieteur Block. They flipped the block to ExxonMobil, a more capable company, in March 2017 without doing any work.
The two directors of Cataleya are the Canadian, Michael Cawood and Guyanese, Ryan Perreira. Neither of them had any experience in oil and gas prior to receiving the block.
As for Ratio Guyana, the other initial owner of the Kaieteur Block, its parent company is the Israeli company, Ratio Petroleum. This company has nearly three decades of experience in the industry. However, it does not have the capacity to conduct ultra-deepwater drilling, which is required for the Kaieteur acreage.
Only a handful of oil companies have the capacity to drill in ultra deepwater, including ExxonMobil, Royal Dutch Shell, Chevron, BP, and Total SE. Ultra deepwater has been closed to drilling for decades because companies just didn’t have the technology and the experience. Besides, there was a lot more oil and gas accessible in shallower waters.
Ultra Deep-water drilling capacity is required when the exploration area is beyond 7000 feet in depth.
Guyana’s Kaieteur Block holds the Tanager-1 well which is currently being drilled by ExxonMobil. It is the deepest well the oil major has drilled offshore Guyana. The well has target depths of 8000 feet, and is estimated to hold 256.2 million barrels of prospective resource.
5. Ramotar gave 2-billion-barrel Kaieteur block away for free without public tender
Former President and Minister of Petroleum, Donald Ramotar, handed the ultra deepwater Kaieteur block to two companies for free.
Had government waited and developed its capacity to subject the award to open, public tender as is a norm in the oil industry, it would have gotten millions of US dollars in the form of a signing bonus.
ExxonMobil’s study of the block has revealed just how much Guyana lost when Ramotar gave the block away for free. Two months after it received the Kaieteur block in 2017, ExxonMobil started a 3D seismic survey which found nine exploration prospects there.
Back in May 2019, a report provided estimates of the unrisked prospective oil resources in the nine prospects.
The report states that the Kaieteur block holds a gross estimated prospective resource of 2.1 billion oil-equivalent barrels. ExxonMobil is currently drilling the Tanager-1 well, estimated to hold 256.2 million barrels.
The entire 2.1-billion-barrel block, at US$55 a barrel, would cost US$115B. That would be 77 times Guyana’s 2020 budget.
It is this knowledge that governments leverage to ensure that when they grant the rights to oil companies to operate blocks, taxpayers make money even before the oil is produced.

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