Why is Jagdeo so cautious about a Petroleum Commission?

Jul 21, 2023 Features / Columnists, Peeping Tom

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Kaieteur News – Guyana’s oil and gas regulatory framework remains weak. When commenting on this at his ‘press conference’ yesterday, Vice President Jagdeo made comments which suggested that he effectively distinguish between the regulatory framework and the management framework.

When one speaks about the governance framework, it is not limited only to the regulatory framework. The governance framework also includes the measures which government has instituted to better manage the sector. A useful guide for assessing a country’s governance framework is the Resource Governance Index. This index ranks countries in terms of their governance performance in the oil and gas sector. For 2021, the Natural Resource Government Institute (NRGI) published damning findings concerning Guyana’s performance on the index.  It categorized Guyana’s governance of its oil and gas sector as being weak, with a poor score of only 55 out of 100 points.

The NGRI identified weakness in value realisation, revenue management and the enabling environment for the sector. The institute noted then that the legal framework governing the licensing process is a cause for concern. Commentators have pointed to this problem, averring the rapid haste with which licenses are being approved. The report also has pointed to problems with transparency. It noted that the government takes considerable time to disclose contracts and observes that negotiations takes place behind closed doors, criticisms which Jagdeo are yet to address.

Instead of doing so, he remains flippant about the absence of a Petroleum Commission. He says that this will follow later: but why later and not now? Why have a revised Petroleum Bill without a Petroleum Commission? There is only one answer: the government is hell-bent on monopolizing the management of the sector and is paranoid about oversight of its licensing and other decisions.

Jagdeo’s failure to immediately institute a Petroleum Commission will have disastrous consequences for the country. Guyana’s ranking in the natural resource governance index will plunge even further.  Instead of bringing the Commission into being immediately, the Vice President is reported to have announced some time ago that an advisory body would be established to advise the President. This advisory body will be a toothless poodle. It is lame alternative to a Petroleum Commission.

The Commission was supposed to have been in place one and half years ago. But nothing has happened.  There is no reason for not having a Petroleum Commission in place. Draft legislation is already in place. The former APNU+AFC had tabled legislation which defined the functions of the Commission. But it may be precisely those functions which provide oversight over the actions of Ministers which have paralyzed Jagdeo and the PPPC from bringing a Commission into being. It is vitally important that this Commission established before any decisions are made regarding the auctions of the oil blocks. By delaying the establishment of the Commission, the awards at any auction of oil blocks will be at the behest of politicians.

The NGRI has also flagged Guyana for a weak enabling environment and a problematic regulatory quality. It has also pointed out to the issue of open data standards where the government has scored a failing score of 12 out of 100. Another major criticism by the NGRI concerns the absence of fiscal rules. This is not an isolated criticism. The IMF has also raised concerns in this area.

Last September, the IMF advised the government to set its annual budgets within a medium term fiscal framework so as anchor fiscal policy in a sustainable way.  The IMF warned that the amendments to the Natural Resources Fund Act do not provide such an anchor. It claimed that the government lacks a medium term fiscal framework. To date the government has not indicated that it has since developed such a framework.  This makes a mockery of the regular announcements by the government that it is spending billions here and billions there. The fact is that for 2022, the IMF anticipated that 3 out of every ten dollars of Guyana’s capital budget would not be spent. But do not tell that to Jagdeo. As far as he is concerned, Guyana is making progress with the governance of the oil and gas sector and the spending of the oil revenues. The truth however can be a little more liberating.

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

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• Commission, distinguish, framework, governance, petroleum

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