Inflated costs

Mar 01, 2023 Editorial

Kaieteur News – The Government is being provided a constant stream of information on the oil sector. Government leaders cannot complain about a lack of knowledge on the crooked ways of oil companies. On its own, the PPPC Government, its leaders, its insiders, and its wisemen know enough regarding how collusive and corrupt oil companies can be. Yet there is this yawning indifference as to how this country is possibly being robbed by the foreign oil companies, with not much effort expended to get to the bottom of things, by checking and verifying constantly.

Inflated production costs are one way through which oil companies have cheated host countries. Hidden costs for executives and other workers; items never bought nor delivered; and bills that do not belong to a project are a start. The list of such costly practices is endless, with oil companies very creative. They have an ugly history of these kinds of sordid practices, and do so until caught. By that time, the resourceful oil companies already have another technique or tactic to rollout on an unknowing host country, lacking in technology, human resource skills, and political will. In the world of regular commerce, savvy businesspeople always have some new scheme to pull fast ones over the authorities, through inflated prices, phony invoicing, and other tricks.

In the oil business, more crooked practices have been compiled (in unwritten form, of course) on how to squeeze host countries using a variety of mechanisms. Transfer pricing is one way that oil companies make rings around new oil producing countries. It is the practice of buying and selling by oil companies in the normal course of business, but involving companies under the common control of the same parent company. Through an artful repricing of items supposedly bought and sold, costs, profits, and taxes are all reengineered to the advantage of the parent company. Transfer pricing has its merits when cleanly executed. When, however, the intent is to employ what is nothing but accounting clever tricks to evade taxes, or to cheat a backward country like Guyana, then there is only what is condemnable. This is especially from the perspective of oil producing countries since there is nothing beneficial in a partner out to trick and cheat due to superior information or position.

This is the unfortunate position in which Guyana finds itself. We know very little about oil, but we compound matters by racing ahead with rapid production, while ExxonMobil’s accounting could be of the funny variety. Often, various respected international watchdog groups have warned us to be careful, to watch for certain red flags, only for the PPPC Government to give them the back of its hand. Chatham House, the Natural Resource Governance Institute, and Oxfam, among others, have shared insights with us, about what to look for, and how to watch our backs. Their advice includes that parliamentarians can press for information, and so can citizens as a whole. What has been offered is a product of long experience, and as gathered from other industry observers; yet the Government of Guyana has been the picture of unconcern, with less than negligible interest. It as if to tamper with anything that ExxonMobil could be engaging in, would be tampering with the interests of the PPPC Government.

Also, the leaders of the PPPC had denounced the 2016 oil contract as a heinous crime, which means that its author, ExxonMobil, come across in the poorest of lights. Now, the same leaders skip along joyfully by the side of the same ExxonMobil that can do no wrong. Here is an oil

company with a history of corporate waviness, one operating 120 miles from land, incurring billions of American dollars in expenses against our oil, and the PPPC Government thinks that it has found the most trusted of oil partners. If ExxonMobil was such a real partner, there would be no 2% royalty abomination, and those other contract provisions that helped it to our wealth. Today, Government and its leaders are only too glad to be in bed with ExxonMobil, and they don’t care about cautions or guidance. The standard is, let ExxonMobil do what it wants, as long as the PPPC is secure, nothing else matters.

costs, Editorial, Government, Inflated, production

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