Jagdeo must say when he knew about the addendum

Sep 20, 2022 Features / Columnists, Peeping Tom

Kaieteur News – A few months ago, there were concerns that the country’s oil royalties were cost recoverable. There was even speculation that the oil companies may have been recovering this royalty from their taxes.

The question about whether the oil royalties were recoverable was raised with Vice President Bharrat Jagdeo at a Press Conference he hosted. The Vice President was non-committal indicating that he would prefer to wait on advice.

The clarification came later. It was explained that while the royalties were not cost recoverable, they were tax deductible. In other words, while Exxon could not reclaim the royalties as recoverable expenses, they were tax deductible.

This column had argued that royalties are inherently taken off the top of oil payments and are not recoverable either as expenses or as part of any taxes. This column took issue with the interpretation that the royalties can be recovered from taxes.

The PPP/C was not bothered. It did not appear overtly concerned that the royalties may be tax deductible.

It also was astounding that Mr. Bharrat Jagdeo would have to seek advice on such a routine issue as to whether the royalties were recoverable. He has positioned himself as a sort of ‘point-man’ on the oil and gas sector. But on the issue of the recoverability of the royalties, he was not only missing the point but beside it.

Later developments would raise serious questions about why Jagdeo could not provide a direct answer at the press conference. As is now in the public domain, the Granger administration had signed an addendum altering the terms of the royalties.

That addendum to the Production Sharing Agreement was signed in 2019 and had the effect of excluding the royalties totally from being recovered. By virtue of that addendum the royalties are not recoverable period, not as expenses and not as taxes.

Jagdeo ought to have known about that addendum. You cannot be the ‘point-man’ on oil and not have known about this alteration, unless someone was hiding this information from him or unless it was a secret addendum. But if he did not know then, he knows now.

What scares the PPP/C and their acolytes about the addendum are its implication. The signing of the addendum suggests that it is possible to make changes to the existing contract, something Glenn Lall has been insisting for years now.

The PPP/C’s response to this implication is to engage in obfuscation and polemics. The new narrative which is now being pedalled is that an addendum is not an alteration of the contract but a clarification.

This is simply not so. An addendum to any contract effectively alters or changes the contract. It is not a clarification. A clarification usually is done by an addition of an appendix not an addendum. Those who therefore peddle this nonsense that the Granger addendum was a clarification are at sea when it comes to this issue of contract amendments.

In the PSA signed between the Government and the oil companies there are annexes. These are similar to appendices. The annexes have been inserted to provide more information, including technical information. There is an annex of the description of the contract area and another of a map of the contract area. Then there is one which elaborates about the accounting procedures for interpreting the relevant provisions of the contract, including recoverable and non-recoverable costs. There is also an annex about petroleum items.

Do not let anyone confuse you as to what is an addendum. And do not let anyone suggest to you that the addendum which was signed in 2019 did not alter the contract. If it was a mere clarification, the relevant provisions would have been inserted as an additional annex to the accounting procedures.

Serious questions now need to be asked as to whether the government knew about this addendum, and if it did, why was it saying that the royalties are recoverable as taxes. In any other part of the world, a belated revelation about an addendum to the oil contract would have been accompanied by a chorus of calls for heads to roll.

Jagdeo needs to tell the Guyanese people if and when he knew about the addendum. And if he knew about it the time he hosted that Press Conference, why would he have to say that he needed to seek clarification on the recoverability of royalties. Is that addendum not very clear that on no count,whatsoever, are the royalties recoverable?

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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Jagdeo must say when he knew about the addendum

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