Latest update November 21st, 2024 1:00 AM
US$73.8M in royalty not paid to Guyana – Ram
Kaieteur News – The Natural Resource Fund (NRF) is missing over US$73 million in royalty payments, Chartered Accountant and Attorney-at-Law, Christopher Ram disclosed in his weekly column published on Saturday by Stabroek News.
Attorney-at-Law and Chartered Accountant, Christopher Ram
Ram’s assessment of the royalty payments came on the heels of a letter and subsequent articles published by Kaieteur News last week. Professor and former Ambassador, Dr. Kenrick Hunte had argued that Guyana was only receiving 0.5% instead of 2% royalty, since ExxonMobil was paying royalty from its profits rather than “all petroleum produced and sold” as required by the Stabroek Block Production Sharing Agreement (PSA).
Subsequently, Vice President Bharrat Jagdeo during his Thursday press conference clarified that the country was being paid its full 2% royalty from the contractor.
However, Ram in his weekly column ‘Every Man, Woman and Child in Guyana Must Become Oil-Minded’ analyzed the revenues earned from the sector from 2020 to 2022 and compared it to the 2% royalty paid to Guyana during the same period.
Royalty is a fixed percentage of the gross value of revenue, paid to governments or the owners of natural resources.
According to his calculations, the country did not receive the amount due. For instance in 2020, Ram pointed out that the total revenues from the sector amounted to US$214,740,000, which means a royalty of US$4,295,000 should have been paid to the NRF; instead the account received US$2,694,000.
In 2021, the Chartered Accountant said this trend continued. While the revenue generated amounted to US$619,565,000, a royalty of US$10,841,000 was paid to the NRF instead of US$12,391,000.
Similarly for 2022, he highlighted that Guyana was paid US$32,350,000 in royalty, less than the US$44,584,000 that the Fund should have received.
He therefore concluded that Guyana did not receive a whopping US$73,789,000 in royalty between 2020 and 2022.
Table showing the total royalty that was not paid to Guyana according to Ram’s calculations.
VP Jagdeo in clarifying the issue told reporters, “Royalty is calculated on production minus, so total crude production minus the crude used in the operations for transport and on the FPSOs (Floating Production Storage and Offloading vessels). In Guyana’s case, the FPSOs are operated by gas, so there is no deduction whatsoever, so royalty is calculated on the basis of total production and total sales. There is no deduction whatsoever. Every month, they have to confirm what the average price would be, the weighted average, and the [government] gives approval for that”.
Ram said that the explanation by the Vice President was woefully incorrect, highlighting once again the urgent need for an independent Petroleum Commission. In fact, he said it was high time for President Irfaan Ali to step in “lest things get worse than they are”.
“Clearly, he (Jagdeo) does not know what the government does, if anything in relation to royalty, or indeed to anything else. It does not appear that the VP has ever bothered to read the 2016 Agreement, let alone its reference to the Petroleum Exploration and Production Act and its definition of petroleum,” the Attorney reasoned.
He said, the very first item in the definition of “petroleum” is described as “any naturally occurring hydrocarbons, whether in a gaseous liquid or solid-state”.
To this end, Ram argued, “Does the country’s petroleum czar not know that billions are charged to operations annually for supplies to the oil companies by at least one oil distributor? His answer was not only completely wrong, but shockingly misinformed, misleading and a total misrepresentation of reality.”
The Accountant explained that in the absence of the cost of Petroleum used for fuel or transportation in Petroleum Operations, it would be difficult to compute the royalty payable to Government.
He was keen to note however, “What is apparent is that there is indeed some US$73.8 M of royalties unaccounted for and one can speculate whether this is all to do with the implausible absence of the cost of fuel used in production or transportation, or in the difference in the accounting methodology used – accrual in the case of the oil companies and cash basis in the case of the NRF.”
- Chartered Accountant and Attorney-at-Law, Christopher Ram, Natural Resource Fund (NRF), published, Stabroek News
Similar Articles
THE BLUNT OF THE DAY
Sports
Features/Columnists
Bureaucracy gone bananas!
…Peeping Tom kaieteur News- Every morning, the government wakes up, stretches its arms, and spends one billion dollars... more
Rising Gun Crimes in the Caribbean: Urgent Action required by all
By Sir Ronald Sanders Kaieteur News – There is an alarming surge in gun-related violence, particularly among younger... more
Weekend Cartoon
