World Bank slams Guyana over lax oversight of Exxon’s operation

Jul 17, 2022 News

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Kaieteur News – A recent report by the World Bank has criticised the Guyana Government’s offshore oil production arrangement with Esso Exploration and Production Guyana Limited (EEPGL)—ExxonMobil Guyana—based on safety, environmental concerns and inadequate payment and has since downgraded its rating of the country’s oversight of the project.

The report dated March 2022, documents the World Bank issuing an interim report that found the country’s rating had slipped from “Moderately Satisfactory” to “Moderately Unsatisfactory.”

According to the World Bank, while grant activities have been designed to help Guyana boost staff, experts, training and analysis at the Ministry of Natural Resources and Ministry of Finance, this came to a halt at the end of 2021. This is despite the fact that grants made to the country were expected to support work through 2024. Meanwhile, flaring pollution and other risks continue.

Back in 2019, the World Bank had approved a US$20M loan for Guyana to build its oversight capacity but this was never taken and, according to government officials, the administration is still in the process of refining its priorities before approaching the International Financial Institution again on the loan.

Minister of Natural Resources Vickram Bharrat told Kaieteur News last Monday that ministry teams are still working on “refining” and bringing the US$20M loan facility on par with the current government’s priorities for the oil sector.

He suggested that, that work should be completed soon. The line of credit sought to strengthen various aspects of the oil industry, including support for cost oil audits and other fiscal areas, environmental monitoring and skills training for locals.

The fact that Guyana is yet to utilise the US$20M to build capacity, together with the fact it shied away from an additional US$1M grant to build the capacity of the Environmental Protection Agency, another of the key agencies in the oversight mechanism had seen the former head, Dr. Vincent Adams, positing “there seems to be a worrying trend.”

Dr. Adams is adamant that Guyana has missed another meaningful opportunity to build capacity in its oil and gas industry, since like the still to be refined, World Bank US$20M loan, when the country also failed to utilise another US$1M.

One Component of the World Bank ‘Guyana Petroleum Resources Governance and Management Project’ totalling some US$5.5M, would have seen agencies such as the Guyana Geology and Mines Commission (GGMC) and the Department of Energy (DoE), among others, receiving “on-the-job training” in reservoir engineering and geology.

This would have allowed for the State to be provided with independent third-party technical expertise needed to analyse estimates of oil and gas resources, assess and conduct economic and fiscal modelling to help forecast oil and gas revenues, and support the cost audit of existing Production Sharing Agreements, among other things.

Another aspect would have seen millions going towards supporting the immediate technical needs at key institutions. It was reported at the time, that Guyana lacked the necessary human resources to address critical and immediate technical needs within prime institutions responsible for the sector. As such, one sub-component of that loan also sought to address gaps “through the direct engagement of external expertise to support the Department of Energy, Guyana Geology and Mines Commission, Ministry of Finance, the Guyana Revenue Authority, the Attorney General’s Chambers and the Petroleum Commission,” which is yet to be established.

The Bank said that given its experience in oil and gas projects, it found that capacity building is most effective when it is based on tangible on-the-job training and learning by doing approach. “Therefore, this activity will allow for the hiring of oil and gas experts as advisors to provide general technical opinions, commercial advice, policy analysis, review of key documents, and other contributions, but more importantly, to deliver on-the-job training and peer mentoring, working closely with the government staff to transfer knowledge and build long-term capacity to manage the oil and gas sector.”

The areas of focus would have included, capacity building to monitor, regulate, and review, among other things, studies on reservoir engineering and geology which would provide the government “with independent third-party technical expertise needed to analyse estimates of Guyana’s oil and gas resources. Assess and conduct economic and fiscal modelling to help forecast oil and gas revenues, support revenue administration and taxation, and evaluate options for future modifications to Guyana’s oil and gas fiscal regime and support the cost audit of existing Production Sharing Agreements.”

On the legal end, this aspect of the project would also assist government in addressing upstream legal issues associated with oversight of the oil and gas resource. At a cost of US$1 million, another aspect of the B component aims to provide the critical hands on training. It said, “To complement the injection of immediate technical capacity that will be provided through B.1…, this sub-component will provide training to strategic staff of the main governmental agencies directly involved in oil and gas.” Other aspects of the component covering the total budget are data and environmental management.

 

 

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