Petroleum Commission could be another layer of oversight in oil spending

Sep 09, 2022 News

---

…tasked with scrutinizing, approving operators’ budgets; plans; reports

Kaieteur News
By Zena Henry
The still to be established Petroleum Commission; some seven years after Guyana would have announced crude in commercial quantity, could present an added layer of protection against unscrupulous oil spending; thus providing Guyana with increased oversight of oil operators’ expenditure.

This was made clear in the 2017 Petroleum Commission Bill which was tabled in the last Parliament by the former A Partnership for National Unity + Alliance For Change (APNU+AFC) government ahead of a no confidence motion that caused the early dissolution of Parliament, and the eventual death of the law governing the semi-autonomous agency. The matter regarding the establishment of the Commission becomes extremely important given the fast pace at which Guyana and its oil partners are producing the commodity, accompanied by the current challenges associated with the proper management of the sector; in this case, the ability to monitor and scrutinize oil company spending in a timely manner.

Vice President Bharrat Jagdeo insists that Guyana has no co-management arrangement with the ExxonMobil consortium and instructed therefore that Guyana’s only access to oil sector spending comes after the companies would have expended the monies. It was however stated in the 2017 Petroleum Commission Bill that the agency is responsible for approving oil operators budgets; indicating government access to oil sector spending even before the companies did their spending.

The law states that, “The function of the Commission is to monitor and regulate the efficient, safe, effective and environmentally responsible exploration, development and production of petroleum in Guyana.” In doing so, the Commission, among other things shall, “ensure well planned, well executed and cost efficient petroleum operation for the achievement of optimal levels of petroleum extraction…” In the execution of its functions, the Commission is also mandated to, “review and approve budgets submitted by the operators”; “participate in the measurement of petroleum to allow for estimation and assessment of royalty and profit oil and gas due to the State” and be responsible for the approval of the exercise. After the assessment, the agency will “ascertain the cost oil or gas due to the operators”. It will also “provide necessary information to the relevant authority for the collection of taxes and fees from petroleum operations.” Additionally, the Petroleum Commission has the important cost oversight mandate to, “monitor operators and their trade practices to ensure that competition and fair practice is maintained.” The United States based financial media website, Investopedia described unfair trade practices as usually taking place in the purchase of goods and services. It said too that the use of unfair trade practices results in “…businesses using deceptive, fraudulent, or otherwise unethical methods to gain an advantage or turn a profit.”

Given the extensive oversight and management power of a Petroleum Commission, Chartered Accountant, Attorney and transparency advocate Christopher Ram had reiterated his stance that the Commission remains a viable option toward Guyana protecting its oil sector, particularly the income garnered from the resource. He told the publication that urgent independent oversight of the oil and gas sector is imperative, particularly where Guyana has decided that its oil production plan is to produce oil faster, ahead of the pending global transition from fossil fuels to clean energy.

Like other concerned stakeholders and commentators, Ram explained that the Petroleum Commission is one of the key bodies necessary in the sector to help Guyana reap the most it could from its oil and gas endowments, while ensuring the protection of its environment. He noted too that if established properly, the agency could “…be free from political influence, and it would have been able to take objective, professional independent positions within the broad policy framework of the government.”

It should be noted however that the functions of Petroleum Commissions are dependent on its content, that is, the model employed by the relevant authorities. For example, when the Ghana Petroleum Commission was formed, responsibility for the sector was removed from the Ministry of Energy which regulated with the assistance of Ghana National Petroleum Corporation (GNPC). Six months after the Commission was formed, the GNPC Act specifically ordered the agency to cease exercise of any advisory function in relation to the regulation and management of the oil sector, while the Ghana Petroleum Commission law under ‘relationship with other authorities’ states clearly that, “Government departments and public agencies shall co-operate fully with the Commission in the performance of functions under this Act.” It says too that the minister on advice of the Commission’s Board of Directors will make regulations for exploration, development, production of petroleum, appraisal of petroleum and related operations among others. Guyana on the other hand has chosen to provide its minister with power over the Petroleum Commission, with instructions for the agency to co-operate with state agencies, particularly the subject minister.

Whereas it is believed that the Commission should be able to function independently, free of political interference, the current draft says that the minister could give the Commission general directions including the observation and implementation of any policy; for the organisation of the agency; its size, staff, employment terms and use of allocated funds among others.

Vice President Bharrat Jagdeo had said in August of 2020, days after Irfaan Ali was sworn in as President, that the body was important would be developed within six months. Earlier this year, he stated that the body could not stop corruption, but that government had not thrown the idea out the window.

---

---