Oil law must have penalties for Minister’s failure to complete timely oil audits – AFC

Jul 08, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – Eight years after the discovery of oil in Guyana, the country has not completed a single review of the US-billion dollar expenses racked by the companies operating in the lucrative Stabroek Block.

With over 30 discoveries made since the Liza One find, the country is yet to complete checking the bills for the period 1999-2017 for exploration costs pegged at approximately US$1.6 billion.

Another audit for costs racked up by ExxonMobil and its co-venturers, between the period 2018 to 2020 is yet to be completed with its findings made public. A contract was awarded since May 24, 2022 for that audit, to the tune of US$7.3 billion to be conducted, but to date, the country has not been updated on the outcome of that process. Instead, over a year later the audit is said to be still ongoing.

With billions of US-dollars at stake, the Alliance For Change (AFC) has said systems must be put in place to ensure the audits are completed in a timely manner.

The party at its press conference yesterday, hosted at its Railway Embankment, Kitty, Georgetown office, told reporters that the issue of delayed audits and its findings should be addressed in the new Petroleum Activities Bill, which will replace Guyana’s 37-year old Petroleum  Exploration and Production Act.

In fact, the AFC believes that there should be penalties for the Minister’s failure to conduct and complete timely audits. While responding to a question from Kaieteur News, David Patterson, Shadow Minister of Natural Resources said, “You are absolutely correct…I am sure that when it comes up, not only will we speak about it in Parliament, I am seeking to put in amendments or suggestions.”

Patterson said the party will not be submitting any comments to the government on the draft Bill but will present its amendments in the National Assembly where the PPP Members of Parliament (MPs) will be expected to vote on each of its proposals. According to the former Minister, this would provide the Ministers of government and other MPs to show the country whose interest they are protecting.

He argued, “They have taken three years to develop this new draft (law) that they have and then they throw it out and then (Vice President) Bharrat (Jagdeo) says you got two weeks to review it and if you don’t review it, you have nothing to say.” However, the MP said it will be proposing amendments in the House to address ring-fencing, royalty, the Petroleum Commission, audits, local ownership and insurance among others.

He explained that while the PPP is not obligated to provide a response to any comments it receives during the consultation process, it will be required to state its position on the amendments that will be submitted by the AFC.

“When we put in our amendments, we will force them to let the nation know exactly where they stand on these matters. They will have to vote against it as a government so it shall be in the records that we stood on the side of the people and they stood on the side of the oil and gas companies,” Patterson said.

He added, “If they vote for no fixed penalties for auditing, if they vote for no petroleum commission, no fixed royalties and those things like that whatever happens in the future until the government changes is on their heads.”

The draft Petroleum Activities Bill was released by the Ministry of Natural Resources on June 19, 2023 with a two-week consultation period for the public to send its feedback. That period ended on July 3, 2023.

Even though the petroleum sector has been moving at a break neck pace, with the oil companies boasting of the record-breaking time in which it has been able to move from discovery to production activities in Guyana, the country has been struggling to keep with the regulatory and monitoring and oversight aspect.

In fact, Vice President Bharrat Jagdeo has made it clear that even though the Production Sharing Agreement (PSA) with Exxon stipulates a two-year timeline in which audits can be done, the oil companies must allow the country to check its records after that prescribed time.

The agreement states that the oil company can dispose of its records after the two years period would have elapsed, unless an audit flags discrepancies which must first be resolved.

According to Annex ‘C’ Section 1.5 (C), “Without prejudice to the finality of matters as described in sub-sections 1.5 (a) and 1.5 (b) all documents referred to in those sub-sections shall be maintained and made available for inspection by the Minister for two (2) years following their date of issue providing, however, that where issues are outstanding with respect to an audit, the Contractor shall maintain documents for a longer period until the issues are resolved.”

Jagdeo however said a ton of bricks would fall on Exxon’s head if they refuse to allow Guyana to conduct the reviews. He said, “We dealt with this issue when it came up several years ago; that it is true that the PSA says that the audit has to be completed within two years. So we had gone pass, even under the APNU period, the two years had passed even before they started the audit and we made it clear when we got in to office, no matter how long the audits take, ExxonMobil and the co-venturers, the companies could never use as an excuse, the timeline in there.”

He continued, “…because if they use that and don’t want to comply with the audit, they would have a ton of brick falling on their head on other issues on the regulatory side.”

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• audits, Law, oil, penalties, timely

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