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Review of Guyana’s outdated oil laws long overdue – fmr. AG Anand Goolsarran
Chartered Accountant and former Auditor General, Anand Goolsarran
Kaieteur News – In a few days, Guyana will hit its one-year anniversary as an oil-producing nation.
Five years have passed since US oil giant, ExxonMobil, discovered massive crude oil resources in commercial quantities offshore Guyana.
However, despite this milestone, Guyana has been operating with decades-old petroleum laws that have not been reviewed in 23 years.
Taking into consideration the fact that Guyana to date has chalked up over nine billion barrels of crude oil resources, Chartered Accountant and former Auditor General, Anand Goolsarran, believes that the review of the country’s archaic petroleum laws “is long overdue.”
In the latest edition of his column, ‘Accountability Watch,’ Goolsarran pointed out that the Petroleum (Exploration and Production) Act 1986 was enacted at a time when there was no evidence of the discovery of petroleum products in commercial quantities.
The Act, since coming into fruition, was only amended twice, in 1992 and 1997 and since then, there have been no further changes.
This comes even as production continues at a rapid pace and is expected to increase exponentially in the coming years.
Without modern laws, the former AG stated, it can spell bad news for Guyana as a novice oil-producing nation.
Goolsarran pointed to the International Monetary Fund’s 2017 report, entitled ‘Guyana: A Reform Agenda for Petroleum Taxation and Revenue Management’ where it identified numerous deficiencies in the Act and where it was recommended that the authorities consider reforming and modernizing the legal and fiscal framework for petroleum exploration and production.
The IMF had stressed in particular on the fiscal provisions, such as royalty payments, profit sharing and taxation, that are very discretionary in nature, leaving the specifics to be dealt with in the various Production Sharing Agreements (PSAs) entered into with oil exploration companies.
In addition, the IMF report stated that the Act grants the Minister responsible for petroleum, in consultation with the Minister of Finance, the authority to remit, in whole or in part, any royalty payable, upon application by a licence holder, or to defer payment.
It also permits the Minister, subject to affirmative resolution of the National Assembly, to exempt the licensee from income tax, corporation tax and property taxes, among others.
The aforementioned provisions, the former AG highlighted, resulted in the current Stabroek Block PSA between Exxon and Guyana.
The lopsided deal has faced heavy criticism as many are of the view that it favors the company more than the country. This is especially in relation to the mere two percent royalty Guyana is receiving as well as the US$18 million signing bonus, both of which many observers consider mere pittances compared with what other countries are receiving or have received.
Not only that, the contract also leaves Guyana with 50% profit-sharing after the recovery of 75% of operating as well as exploration and development costs, without due consideration of profitability, the quantum of discovery and price fluctuations, exemption from various forms of taxation, absence of ring-fence provisions, among other factors.
Given these concerns, there have been increasing calls for the agreement with ExxonMobil to be renegotiated so that Guyana can get a better deal but so far, the Chartered Accountant noted, both the previous and the present administrations have refused to entertain any thought of doing so.
“Few will disagree that the PSA with Exxon has resulted in Guyanese citizens not deriving the maximum benefit from the oil resources which, it must be emphasized, belong to them,” he said.
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