Ram exposes Jagdeo’s misleading claims on ring-fencing on oil projects 

Dec 25, 2023 ExxonMobil, News, Oil & Gas

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– says VP must seek guidance in understanding Guyana’s oil laws

– maintains country is de facto investor for ExxonMobil oil projects

Kaieteur News – There are a series of challenges and weaknesses in the petroleum sector, which if not urgently addressed, will morph into crises with severe consequences for the country and its people. So said Christopher Ram, attorney-at-law and chartered accountant in an extensive interview at the invitation of Kaieteur News to discuss recent comments made by Vice President Bharrat Jagdeo about him at his latest press conference at Freedom House.

Ram made it a condition of the interview that he would not be revisiting that counterproductive road but rather to address the substantive issues dealt with by the Vice President, namely Ram’s assertion that the Government has become a de facto investor in exploration and prospecting activities of the Stabroek block, that the 2016 Petroleum Agreement with ExxonMobil does not permit ringfencing and the PPP/C’s new mantra of sanctity of contract.

Ram identified as grave, the challenge of credibility, which some even consider one of trust and integrity; a challenge of policy; a challenge of execution; a challenge of institutional capacity; a  challenge of understanding the basic tenets and principles of the 2016 Petroleum Agreement; a challenge of execution and even a challenge of simple bookkeeping. According to the commentator, his instinct preferred the word “crisis” to “challenge” but opted for the lesser word in order to give the Government both space and early warning to act and avert the inevitable, disastrous and costly consequences which inaction will bring.

Ram attributed the credibility challenge as stemming from the Government’s and the PPP/C’s complete reversal of its position on renegotiation of the 2016 Petroleum Agreement expressed unequivocally by President Irfaan Ali and his Vice President over the three years 2018 – 2020. First it was Jagdeo in 2018 during the Motion of No Confidence, and again by him in a radio interview December 2019. In fact, Jagdeo mocked the Granger Administration for signing a “zero royalty, no taxes, no ringfencing” contract even after “three billion barrels of proven reserves” had been found.

Ram noted that Jagdeo was not speaking in his personal capacity or expressing a personal view, and that no less a person than PPP/C’s presidential candidate and now President, Dr. Irfaan Ali in an interview with the Guyanese Critic in February 2020 was equally unambiguous and convincing. Ram noted that in response to a follow-up question by Critic after he had spoken at some length on his position on renegotiating the contract, Ali concluded with the commitment to “review and renegotiate”.  Ram said the evidence is there for the world to see, again and again, and it cannot be wished away or erased.

Ram also expressed disappointment that not only has that pledge to the electorate of the country has not been honoured, but the Government has shown that it could not and would not even meet the lower standard of “better contract administration”. Obsessed with party and political control, Ram said Jagdeo has also reversed himself on an independent, professional Petroleum Commission, preferring loyalists to competence. As a result, Ram said Guyana has run into problems affecting two successive audits of the petroleum operations, and too many exploitable loopholes in a local content framework which result in periodic foreign exchange shortages.

Ram also addressed Jagdeo’s rejection of his claim that Guyana is a de facto investor in petroleum operations. Jagdeo said he has not seen any borrowing by the government injected into the petroleum sector hence Guyana cannot be considered an investor. According to Ram, Jagdeo knows as well as anyone that borrowings are only one form of financing of investment. Ram said, “As any company finance executive, or any review of financial statements of Banks DIH or DDL would elucidate for him, there are two other principal methods – raising money from shareholders via equity or preference shares, or retained earnings of the company.”

Ram also claims that the Vice President must be aware that Exxon has been permitted to use and claim as cost recoverable expenses, expenditure on its new head office building at Ogle. He said too that Jagdeo is also aware that Exxon’s participation in the gas to shore project will utilise revenues from petroleum that would otherwise be available as profit oil of which the government would have been entitled to 50%. “It is a logical corollary that by virtue of being a 50% participant in profit oil from the Stabroek block, Guyana is bearing 50% of all cost, contractually or otherwise deemed recoverable,” Ram said.

Ram then turned to Jagdeo’s statement that the Stabroek Block Agreement does not allow for ringfencing. Emphasising that he wanted to be entirely respectful to the Vice President, Ram suggested that Mr. Jagdeo should seek  some guidance on regulation 18 of the Regulations made under the Petroleum Exploration and Production Act of 1986.

Regulation 18 states: “A petroleum prospecting or production license …. shall be in the form of form C or form D, as the case may set out in the Schedule, and shall incorporate the conditions  subject to which [the licence] it is granted, and which are subject to such modifications as the Minister may, from time-to-time order.”

Why should any Guyanese not expect that the Vice President who has held and holds such exalted positions in governments not understand that petroleum activities are governed by laws, and it is his duty to understand what those laws are, the lawyer questioned.

In conclusion, Ram said that there has been nothing done over the past three years to make him optimistic about the future management of the sector and that unless there are radical changes in personnel, policy, implementation and execution, the situation will only get worse. All with grave consequences for Guyana.

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• Attorney-at-Law, Bharrat Jagdeo, Chartered Accountant, Christopher Ram, Vice President

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