Govt. yet to account for use of US$607M oil money in 2022

Jul 12, 2023 ExxonMobil, News, Oil & Gas

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…as NRF Annual Report yet to be made public

Kaieteur News – The Government of Guyana (GoG) was hit with severe criticisms in 2021 when it rushed through the passage of the Natural Resource Fund (NRF) Act in Parliament during the Christmas season. In fact, the legality of its passage was even challenged in the High Court by Opposition Parliamentarians, in a bid to address its deficiencies but was subsequently defeated.

A key concern for Guyanese was transparency in the governance and use of the revenue that flows into the account from the oil and gas sector. Stakeholders were especially disturbed that the legislation features no penalties for misuse of the funds. When it comes to transparency, the Act provides for an annual report, detailing the use of the revenue, to be laid in the National Assembly and published for all Guyanese to see, however this document is yet to be made public.

In 2022, Guyana for the first time used a portion of its oil revenue to fund its National Budget. Some US$607.6 million was approved in the National Assembly.

Section 16.2 of the NRF Act explains that “All withdrawals from the Fund shall be deposited into the Consolidated Fund and shall be used only to finance- (a) national development priorities including any initiative aimed at realizing an inclusive green economy; and (b) essential projects that are directly related to ameliorating the effect of a major natural disaster.”

Government has not identified what are the “national development priorities” being funded by the oil revenue. This then begs the question as to how exactly the money generated from the nation’s natural resource was put to use.

On August 30, 2023 President Irfaan Ali appointed the members of the NRF Board along with the Public Accountability and Oversight Committee, and the Investment Committee. These bodies are expected to assist in the management of the Fund.

Section 32(1) of the legislation requires the Board of Directors to prepare and submit to the Minister, as soon as practicable but not later than 30 days after the receipt of the audited financial statements of the Fund and the external auditor’s report from the Bank, the annual report of the Fund.

The audited financial statements should have been completed since April 30, 2023, in keeping with the provisions of the NRF Act.

The annual report is expected to include the audited financial statements of the Fund and the external auditor’s report on the Fund, to account for its use.

The annual report, according to the NRF Act shall also include feature details of all deposits to, and withdrawals from the Fund, among other critical information regarding the performance of the Fund.

According to the legislation at Section 32(4), the Minister is expected to lay this report in the National Assembly at least 30 days after receipt from the Board of Directors. The Law goes on to state that this particular report, along with audited financial statements shall be made available to the public, three days after being laid in Parliament.

Be that as it may, the Annual Report of the Fund could not be found on the Ministry of Natural Resources websites yesterday. Efforts made by this publication yesterday to contact the subject Minister, Vickram Bharrat on the progress of the report were futile.

The purpose of Guyana’s Natural Resource Fund is to ensure there is prudent management of the nation’s oil earnings for the present and future benefit of the people by ensuring that volatility in natural resource revenues does not lead to volatile public spending.

With little transparency regarding the use of Guyana’s oil wealth, International Financial Analysts worry that the revenue may not be used to develop the country and improve the lives of its poor citizens.

For instance, Director of Financial Analysis at the Institute for Energy Economics and Financial Analysis (IEEFA), Tom Sanzillo recently pointed out that the government has not been prioritising saving the funds generated from the industry like Norway but has instead embarked on a massive infrastructural and energy development scheme which may very well benefit its partner, ExxonMobil more than the citizens in the country.

He reasoned, “It may work to Exxon’s benefit to put in new roads, it may be Exxon’s benefit to build a new gas plant but they don’t need that kind of electricity system in Guyana and who knows if they actually need the roads that are being built because there is no public process so what you have is a plan and the plan is to use the money to keep the existing political structure in power and that’s what is going to be done.”

Meanwhile, Director of Energy at Americas Market Intelligence, Arthur Deakin, during a recent panel discussion on Guyana’s oil wealth shared the view that government lacks a clear structure on how the resources from this sector will be used to transform the lives of Guyanese.

Deakin was asked to share his views on why Guyana still has high levels of poverty and why he was optimistic about the situation. In his response, the International Energy Analyst explained that the Government of Guyana has made “fruitful decisions” which led to investments from the ExxonMobil-led consortium in the Stabroek Block. He noted that Guyana’s oil sector has been moving at one of the fastest paces known in the industry; however when it comes to translating that wealth to the population, this has been taking some time. In fact, the specialist pointed out that for the wealth to benefit the population, it would require structural planning by the administration.

To this end, Deakin said, “The government lacks a clear vision, a clear plan on how it’s gonna spend the money it’s receiving from the oil revenue so I think there is a lot of room for improvement.”

He was keen to note, “Of course, the government is going to say that they are doing a really good job, they wouldn’t admit that they are not and there is a lot of credit for what they are doing in terms of bringing in new investment for the oil and gas field for the Stabroek Block and also surrounding blocks…but when you’re thinking about structurally planning, sustainable long-term wealth for the population, I think there’s still a lot to be done. I haven’t seen a plan or a clear structure of how the money is gonna be spent in a way that’s good for the population.”

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• NRF, oil, Report, revenue, use

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