‘Law doesn’t allow Govt. and Exxon to pay for gas pipeline through cost recovery’ – former Auditor General  

Sep 24, 2024 News

---

Kaieteur News – Former Auditor General (AG), Anand Goolsarran has made it clear that the law does not provide for ExxonMobil Guyana Limited (EMGL), the operator of the Stabroek Block to rack up expenses for the government then deduct it from revenues owed to the country.

Goolsarran in his weekly column, Accountability Watch, published on Monday by Stabroek News, prefaced his contention by highlighting that the country’s public debt grew by 29.3% from the end of 2023’s US$3.9B to US$5B as at June 2024.

Drawing his reader’s attention to the Gas-to-Energy (GTE) Project, the former AG said media reports indicate that the pipeline component of the project is being financed by ExxonMobil while repayment will be made via a deduction from Guyana’s share of profit oil over a 20-year period, through the cost recovery mechanism in the oil deal.

That provision allows Exxon to deduct 75% of the country’s monthly oil to repay its investments. Consequently, he pointed out, “If this is indeed so, there are four main concerns that need to be addressed. The first is that Section 25 of the NRF Act prohibits the financial assets of the Fund from being encumbered by any person or entity. The Act goes on to state that: (i) the Government shall not borrow or lend from the Fund, or hold a financial instrument that places or may place a liability or contingent liability on the Fund; and (ii) any contract, agreement or arrangement that encumbers any financial assets of the Fund, or future petroleum revenues, shall, to the extent of such encumbrance, be null and void.”

Secondly, he noted that there is still no clear indication as whether a loan agreement has been entered into between the Government and the U.S. oil giant, and what are the terms and conditions of such an agreement. Goolsarran explained, “Section 3(6) of the External Loans Act requires all loan agreements to be laid before the National Assembly as soon as practicable after the execution of such agreements. There is, however, no evidence that this was done, assuming an agreement is in place.”

He went on to point out that the Natural Resources Fund (NRF) Act establishes the NRF Account to manage the natural resource wealth of Guyana for the present and future benefit of the people and for the sustainable development of the country.

“By Section 15 (2), petroleum revenues are to include, among others, all revenues from: i) royalties, whether paid in cash or in kind, due and payable by the holder of a petroleum licence; and ii) the Government’s share of profit oil received under the terms of a production sharing agreement or any other agreement,” the former AG said.

He was keen to note “There is no provision for the holder of a petroleum licence to incur expenditure on behalf of the Government and deduct it from the revenues due to the Government.” The fourth concern, according to Goolsarran is that the country’s debt could be understated by the amount expended by Exxon on the project.

Recognizing that the project could be deemed a “national development priority” or an “initiative geared at realizing an inclusive green economy” as outlined in Section 16(2) of the Act, the former Auditor General said the project could therefore be financed out of withdrawals from the NRF Account and reflected in the Estimates of Revenue and Expenditure, in combination with any form of external financing.

Goolsarran however maintains that the project cannot be financed through the current arrangement. Raising similar concerns last week was the former Minister of Finance, Winston Jordan during an appearance on Nation Watch. Jordan said Vice President, Bharrat Jagdeo during a press conference informed the nation that Exxon would not have advanced the money for the project if the company did not believe it was profitable. To this end, the former Minister explained, “So Exxon has advanced us the money which is a loan. If this is a loan, why doesn’t it appear in the debt profile of the country?”

He added, “How much is the loan? Do we know how much is the loan? We don’t know. What are the terms of this loan, we don’t know. We have not seen an agreement for this loan. Who owns the pipeline?” Jordan also pointed out that there is also a cost attached to maintaining the pipeline which the nation is still unaware of. As details on the financing arrangements of the project remain unclear, Jordan has called for the agreements with Exxon to be made public.  “Why isn’t this debt in our debt profile, where is the agreement? Why hasn’t this been carried to the Parliament? Have they started back repayment, where is the repayment coming from,” Jordan questioned.

---

• former AG, gas, GTE, Law, NRF, oil

---