PPP ditches inter-ministerial committee on oil sector development and spending

Sep 02, 2022 News

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…shifts full responsibility to President’s Office

Kaieteur News – In the 2017 assessment of Guyana’s oil and gas capacity, the World Bank found that the previous Government had put in a place a mechanism that involved key Government Ministries and agencies in an Inter-Ministerial Technical Committee on Petroleum, to ensure all input from relevant agencies in relation to the development, management of the oil sector, and even spending of the revenues garnered.

This was reported in the US$20M loan document that was approved by the bank in 2019, but is still to be utilised by the current Government in 2022. The document sought to provide important assistance to Guyana so that it could protect its environment, its oil money from unscrupulous oil companies, and utilize that money for the total benefit of the Guyanese populace.

In the World Bank governance review of O&G sector which was done in April of 2017, the financial institution concluded that the legal and regulatory frameworks in Guyana are underdeveloped and in some cases outdated, requiring update in line with international good practice. They also highlighted that the award of future production sharing agreements and licenses requires updating in view of the country’s exploratory success, while also noting that the requisite human resource training and institutional capacity to oversee and manage the sector is limited and that capacity to collect, manage, and plan the use of the O&G sector revenues needs to be strengthened- in addition to increased coordination and enhanced needs among Government entities.

It noted that the Inter-Ministerial Technical Committee on Petroleum was formed by Ministry of Finance (MOF) in cooperation with the Ministry of Natural Resources (MNR). The bank continued that in 2019, the MOF partnered with the Department of Energy (DE) and the Committee retained its chairmanship format in being co-chaired by one representative of each institution as membership consisted of representatives of key ministries and institutions primarily responsible for the oversight of the main aspects of the sector.

The World Bank added that through various sub-committees such as ‘Legal’ and ‘Regulatory’, other stakeholder oversight bodies would also contribute towards the overall developmental and planning process. As such, key members of the Inter-Ministerial Technical Committee consisted of the following agencies: Ministry of Finance (MOF), DE, Ministry of Public Infrastructure (MPI), Ministry of Foreign Affairs (MFA), Guyana Geology and Mines Commission, the Guyana Revenue Authority, Environmental Protection Agency, Bank of Guyana (BG), Bureau of Statistics, Lands and Surveys Commission, Civil Defense Commission, Maritime Administration and the Guyana Civil Aviation Authority.

While this is a structure, the former administration sought in the early management of the sector, fast-forwarding to 2022, the core management of the industry has been brought under the control of the President’s Office with Vice President Bharrat Jagdeo tasked with overseeing the oil and gas industry.

The issue with the new mechanism however, is that a number of areas within the sector remain unresolved with local and international oil and gas stakeholders continuously highlighting risk areas that could see Guyana becoming a victim of its oil wealth. They have expressed, among other things, concerns over the management and spending of the oil funds, inadequate and unsatisfactory insurance to protect against oil spill damage, inadequate measures to monitor oil companies’ spending as well as verification and auditing within a timely manner and co-management of oil company spending since the oil developer’s expenses are covered by Guyana’s oil.

Stakeholders have not been happy with Government explanations regarding many of the areas mentioned. For one thing, they continue to question Government’s spending of the oil fund as they have dedicated a significant amount of the money initially earned to the 2022 budget for mainly capital spending, despite calls for more money to be spent on human development, and for it to be spent equitably. The Government is still in the process of making the Natural Wealth Fund fully functional.

The Government has apparently failed to utilise a number of support mechanisms also put in place by the last Government to aid in the development of the sector. These would include an EPA grant to strengthen that agency, a more than US$11M Inter-Development Bank loan, and the said US$20M loan. The Government has also failed to implement a Petroleum Commission which based on experience from other countries, plays an integral role in regulation, oversight, and management. In the Ghana Petroleum Commission model, the body was described as a central location for all oil and gas information. It said that all ministries and body must work along with the Commission, while they carry out their mandates. The Vice President had promised the formation of the Commission since 2020. In April of this year, he said that the Commission would not prevent corruption but the Government has not given up on forming the body.

 

 

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