Apr 30, 2017 News
Transparency Institute Guyana Incorporated (TIGI) is bothered by the fact that the Ministry
of Natural Resources is yet to provide a response to a letter sent to it over a month ago. The institute said that the Ministry did not even have the common courtesy to acknowledge receipt of the letter.
The letter questioned the operations of ExxonMobil. It is titled, “documentation to be required and used to assess Exxon’s application for a Production Licence”
TIGI said that as Guyana engages in its quest for Extractive Industry Transparency Initiative (EITI) candidacy, it is important to ensure that the Ministry of Natural Resources is committed to the endeavour.
The Institute continued, “Considering that the EITI is a global standard to promote open and accountable management of oil, gas and mineral resources, and knowing of Guyana’s stated interest in implementing this standard, TIGI wrote to the Minister of Natural Resources requesting clarification on whether he had asked ExxonMobil to submit a feasibility study of its proposed Stabroek Block development. This request was as it proceeds with the evaluation of the company’s application for a production licence.”
TIGI said that the letter was delivered on March 29, 2017. “We obtained acknowledgement of receipt almost a month later by calling to enquire on April 27, 2017. However, even after this time, we were unable to obtain a clear response about whether or not a response is forthcoming.”
Yesterday, Minister of Natural Resources Raphael Trotman said that the Ministry did not ignore the letter. He said, “I am not aware of it so I have to find out.”
The Minister continued, “We are not hiding or running from anybody. We have been meeting with as many groups as physically possible. So I will engage them; I will look for the letter certainly. No disrespect meant. I will locate the letter on Tuesday and respond to it as soon as I can.”
“But I can assure you that it is nothing deliberate.”
In the letter, TIGI “respectfully” referred the Minister to Section 33 (1) of the Petroleum (Production and Exploration) Act of 1986. TIGI President Troy Thomas said that while that Section of the Act gives the Minister an opportunity to direct companies, which have applied for a Petroleum Production Licence to carry out investigations and studies, to assess the feasibility of the proposed project, the accompanying Regulations make it clear that such investigations include “economic feasibility Studies relating to the recovery, processing and transport of petroleum from the discovery block or blocks in the prospecting area.
Thomas said, “Considering the structural stability of oil prices at low levels and their upward stickiness; the increases in US shale gas production; the bearish outlook for oil by industry experts; and the extreme uncertainty about a temporal extension of the OPEC (Organization for Petroleum Exporting Countries (OPEC) production cuts and the effectiveness of such an extension if it were to happen; TIGI imagines that the Government of Guyana would want to know with a high degree of confidence that production licences are only issued for projects that are economically feasible.
“TIGI is also keen, as might be the Government of Guyana, that the extraction and production of oil in the Stabroek Block would yield a return that is consistent with the expectations of Guyanese.”
Thomas noted that even with an extension of the production cut by OPEC, a record increase in non-OPEC production would prevent any significant increase in oil prices.
Thomas said that TIGI is also aware of the moral hazard that arises when profitability margins are tight as they must be in the current economic environment. He said that in such situations, profit maximising companies will be inclined to take greater risks, especially if they are not contractually required to themselves underwrite those risks.
Thomas said that the development of the Stabroek Block oil fields by ExxonMobil and its partners, production is being aggressively fast-tracked despite the contrary extraction paths implied by the persistently weak market fundamentals.
He said that both the Government of Guyana and ExxonMobil have announced that” production would begin in 2020, even though ExxonMobil will only be able to make a ‘financial decision’ sometime in mid-2017, according to its Country Manager, Jeff Simmons, in an outreach to the media fraternity.
It is therefore all the more important for citizens, civil society and agencies such as TIGI to ensure that the coincidence of interests between government and ExxonMobil does not belie the former’s commitment to the national interests in regard to both the financial returns and safety and environmental security.”
TIGI requested that the Minister share with it the types and particulars of the studies and investigations he has requested as part of the process for evaluating Exxon’s production licence application. “We further wish to know if the documentation listed under Section 10 (e) of the Form for Application for a Petroleum Production Licence” as prescribed by the Regulations accompanying the Petroleum (Production and Exploration) Act of 1986, and in particular subsection (f) of Section 10 (e), will be required in the evaluation of ExxonMobil’s application.”
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