Absence of a Petroleum Commission is a recipe for resource curse – Chartered Accountant, Chris Ram

Nov 17, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – Chartered Accountant, Christopher Ram believes the absence of a Petroleum Commission to ensure independent governance over the nation’s multi-trillion dollar oil resources, is a grave misstep by the administration.

In his most recent column published by Stabroek News, Ram said, “It boggles the mind that we have a Forestry Commission; an independent Commission for gold, diamond and mining; a Broadcasting Authority; a Civil Aviation Authority; a Rice Development Board; a Livestock Development Authority and a Tourism Authority; while petroleum, which dwarfs all the other economic subsectors combined, is firmly in the hands of politicians, who seem unfamiliar with the basics of the sector.”

In the absence of such a commission, Ram said stakeholders ought not to be surprised by the “demonstration of incompetence and recklessness” that was blatantly evident in the US$214M audit fiasco.

That debacle involved the audit of ExxonMobil’s US$1.6B expenses by IHS Markit, a British Consultancy Group. Following its review of those costs, incurred from 1999 to 2017, the auditors flagged US$214M as disputed costs. The Guyana Revenue Authority which serves as the government’s advisor on these matters gave its no-objection to IHS’s findings and recommended that the audit be closed with the said sum.

Despite GRA’s advice, Senior Petroleum Coordinator, Gopnauth Bobby Gossai who is attached to the Petroleum Unit of the Natural Resources Ministry engaged Exxon in the unauthorized reduction of the disputed sums to US$3M. Following a probe that was ordered by President, Dr. Irfaan Ali to ascertain who was at fault, the ministry said Gossai was clearly out of line and would face “disciplinary action.” Gossai was subsequently fined 15 days’ pay and given a warning.

Ram argued in his column that an independent Petroleum Commission could have prevented such incidents which underscore perceived weaknesses in ministerial leadership and political direction at the Natural Resources Ministry. He noted too that the audit fiasco is a clear indication that stakeholders must also lower their expectations of the ministry as it pertains to ensuring good governance of the oil sector.

In a separate comment, Ram told this newspaper that the absence of a commission is a recipe for the resource curse, a term used to describe countries rich in natural resources, like oil, that often experience less economic growth and worse development outcomes than countries with fewer resources. This happens due to mismanagement, corruption, and a reliance on a single resource that can lead to economic instability.

Like Ram, several international commentators have warned that the absence of a petroleum commission, an independent body that oversees resource management, can exacerbate the resource curse. Without proper governance and oversight, industry analysts have said that oil wealth may be poorly managed or become concentrated in the hands of a few, leading to corruption, inequality, and hindering broader economic development.

Prior to the 2020 General and Regional Elections, senior members of the People’s Progressive Party had committed to ensuring that a petroleum commission would be established. Specifically, Vice President, Dr. Bharrat Jagdeo during his time as Opposition Leader, often roasted the former David Granger administration for failing to have a petroleum commission in place.

Jagdeo’s commitment to establishing such a commission was also made several times after assuming office. According to an August 14, 2020 report from the Department of Public Information (DPI), Jagdeo is quoted saying that the establishment of a Petroleum Commission would take place within eight months and would see more Guyanese having a prominent place in the Oil and Gas Sector and enjoying the benefits of the oil resources.

Jagdeo had said, “The Petroleum Commission will be a technical commission because what you need is technical oversight with some of the best brains, and we hope that Guyanese would heavily be involved there with some foreign help until we train our people.”

The chief policymaker for the sector had also explained that the day-to-day functions of the petroleum industries will be carried out by the commission rather than having more input from the Ministerial or Presidential level.

“The Office of the President, or the Minister, will give more of a policy input as in they will be required to clear policies or ensure that they remain faithful to the policy directions,” Dr. Jagdeo had clarified.

(See link for full report: https://dpi.gov.gy/establishment-of-petroleum-commission-to-see-more-local-involvement-in-oil-and-gas-sector/)

Even President, Dr. Irfaan Ali had promised during his inauguration speech that a commission would be established and will “ensure that the oil and gas sector is not subjected to undue political interference”. (See link for speech: https://www.guyanaembassy-kuwait.com/inauguration-address-of-h-e-president-dr-irfaan-ali/)

Three years since making those commitments, Guyana is yet to have a Petroleum Commission in place. The government’s chief policymaker for the industry now argues that such a body does not mean corruption will be kept at bay. Dr. Jagdeo also insists that the Natural Resources Ministry is already carrying out effectively, every function that would be done by a commission.

On Jagdeo’s assessment of the performance of the Ministry, Ram said that anything else would be an admission of failure. In any case, Ram said he wonders what objective benchmark could have led to such a positive assessment.

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• Chartered Accountant, Chris Ram, Civil Aviation Authority, Gopnauth Bobby, Senior Petroleum Coordinator, Stabroek News

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