PNCR demands Jagdeo address concerns over interest rates charged by ExxonM

Aug 07, 2024 News

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…says management of oil sector amounts to criminal dereliction of duty

Kaieteur News – The People’s National Congress Reform (PNC/R) is demanding the government of Guyana to clarify the interest rates/equity charges Guyana is paying to oil major, ExxonMobil for its investments in the Stabroek Block.

In a press statement on Tuesday, the main political Opposition party called on the government to clarify whether or not Exxon is charging interests on its investments in the Stabroek Block and, if so, at what interest rate. In its blistering statement, the PNC/R argued that the reluctance of Vice President, Bharrat Jagdeo – who manages the petroleum sector – to fully disclose information on this matter has gone “beyond eye pass”.

It was only last week during his press conference at Freedom House that the VP faced questions on the issue from Kaieteur News. Jagdeo however refused to address the rate of return being charged by the oil company.

Pointing to the importance of the matter at hand, the PNC/R explained that tens of billions have been invested to develop the oil fields to date. As such, it noted that even an interest rate of 5% would result in a huge cost to the country. To this end, the political group flagged the possibility of Guyana losing billions in revenue leakage.

According to the PNC/R, “These monies could instead be used to alleviate the cost-of-living crisis, raise salaries, eradicate poverty and meet many other urgent needs.”

Consequently, the party argued, “His (Jagdeo’s) disdain for his responsibilities as the PPP’s oil autocrat thus represents an assault on the well-being of every Guyanese…his cavalier approach to this matter and others in the oil sector amounts to a criminal dereliction of duty.”

Expounding further on the issue, the PNC/R drew attention to Annex C in the 2016 Production Sharing Agreement (PSA) which states that interest expenses are recoverable without the approval of the minister if they are “consistent with market rates.”

The party however observed that in the first audit of Exxon’s costs, incurred between 1999 and 2017 and commissioned by the Coalition government, the document made it explicit on page 4 that the company did not recover any interest expenses. According to the report, “interest and financing costs are recoverable under the 2016 PSA. However, EEPGL confirmed during the audit period that no interest or financing charges have been included in cost recovery – the audit team has confirmed that no interest or financing costs are included in the amount presented in the Q4 2017 cost recovery statement.”

Such an explicit and direct statement is however missing in the second audit of Exxon. The US$7.3B cost recovery audit for the period 2018 to 2020 was commissioned by the PPP.

Since the PSA allows for interest expenses to be recoverable without the approval of the minister, the party cautioned that any audit that lacks necessary thoroughness will not automatically flag them when they appear in the cost recovery bank, especially when the Stabroek Block operator says Guyana is not being charged interest on developments.

“As a result, it is, at minimum, incumbent upon the government of Guyana to monitor quarterly expense reports to identify whether interest is being charged and to raise this issue with the operator if it is not living up to its word,” the PNC/R explained.

The party was keen to note that the second audit in addressing the issue of withholding tax (Exception 17), it tangentially suggests that interest is being charged. Consequently, the PNC/R stated that this raises several questions; chief among them is whether this is indeed the case, what the interest rate is, and how it compares with market rates.

“It does not require much effort on the part of Jagdeo to clarify the situation. The people of Guyana must so demand…billions of USD of the national patrimony are at stake. Going forward, auditors must be instructed to look closely at the issue of interest and provide detailed and specific commentary,” the Opposition party urged.

Additionally, the group noted that government must also keep a close eye on expense reports to note any interest charges. “If interest is indeed being charged, they must engage the Operator for the recovery of these funds, and report this to the nation. The government cannot afford to continue blindly when so much is at stake,” the PNC/R said.

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• charged, duty, Exxon, interest rate, Jagdeo, PNC/R

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