OGGN: Govt. breaches sanctity of contract on NRF tax payments but still unwilling to ring-fence

Jan 01, 2024 ExxonMobil, News, Oil & Gas

Kaieteur News – Civil society organization, Oil and Gas Governance Network (OGGN) views the non-payment of taxes from the Natural Resource Fund (NRF) as a violation of the Stabroek Block contract.

In a missive on Sunday, two members of the Network, Darshanand Khusial and Charles Sugrim argued that Guyana continues to be shackled to an unjust oil contract, receiving a meagre 14.5 percent of revenue while the government holds firm to the ‘sanctity of contract’ principle to evade renegotiating for fairer terms.

OGGN pointed out that Attorney-at-Law, Christopher Ram recently exposed that the NRF is overstated by almost $275 billion, as the government has failed to adhere to the very terms of the sanctified agreement which mandates payment of taxes for the oil companies from Guyana’s share of revenues earned.

According to OGGN, “The government has been breaking sanctity of contract specifically with respect to 15 (4) in Stabroek Block Production Sharing Agreement and 16 (2) in the NRF Act…it is evident that the Government of Guyana (GoG) issued HESS a tax receipt given HESS is publicizing this on its US website for all to inspect. The GoG issuing a 2022 tax receipt to HESS when there is no accounting for how the money was paid seems to be a case of enabling international foreign tax credit fraud.”

It said that the Attorney General and Legal Affairs Minister, Anil Nandlall SC has since disputed that the NRF is overstated by billions, as the NRF Act takes precedence over the contract.

Nandlall in a statement responding to Ram’s column published in Stabroek News said, “The author places great reliance on the infamous 2016 Petroleum Production Agreement, as that Agreement imposes upon the Minister, a number of obligations in respect of the payment of taxes to the GRA on petroleum production. Those provisions of that Agreement have obviously been overtaken by the Natural Resource Fund Act. It is a very rudimentary principle of law that if a contract conflicts with a Statute, the Statute shall prevail.”

OGGN mocked the response by the AG, contending that the government which has been claiming sanctity of 2016 Stabroek Block contract now claims the 2021 NRF Act should take precedence over the oil contract.

The group reasoned that the administration has used the ‘sanctity of contract’ principle to avoid renegotiating the agreement, even though a fundamental provision – ring-fencing- can be implemented without changing the terms of the contract.

Ring-fencing would mandate that each oil project pay for itself. It would also increase Guyana’s share of revenue after the project costs have been recovered.

“The current government has pointed to the opposition signing the Stabroek Contract implying it is handcuffed from obtaining a better deal. However, the opposition has approved 2 Stabroek Block projects, i.e. Liza 1 & Liza 2, while the current government has approved 3 projects: Payara, Yellowtail, and Uaru. Hence, the current government has allowed 3 opportunities to slip by where they could have used ring-fencing to secure more oil money for Guyana,” OGGN reasoned.

The group argued that ring-fencing each project could result in billions of US dollars flowing to Guyana which can be used to help the over 40 percent of the population living on less than US$5.50 a day, however the GoG continues to “parrot the highly questionable sanctity of contract”.

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Contract, NRF, ring-fencing, SANCTITY, tax, violating

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