Latest update July 27th, 2024 12:59 AM
May 27, 2019 News
By Kiana Wilburg
“If they don’t do a good job, they could end up blessing something that is actually bad. They may say ‘yes we checked. There is no evidence so we are not doing anything.’ So what you have…is a government entity that has allowed the oil companies to defraud the country…” – Dr. Mangal
Even though he is supportive of the State Asset Recovery Agency’s (SARA) probe into the award of Guyana’s oil blocks, Oil Consultant Dr. Jan Mangal says that one needs to be cognizant of the fact that the entity’s chances of success are slim.
The former Presidential Advisor said that readers simply need to look at SARA’s track record to understand his conclusion. Since being formed as a department in 2015, and then a legal entity in 2017, SARA is yet to recover a single state asset. Dr. Mangal also opined that the challenges before SARA in this investigation will be immense as it is going up against some of the world’s largest oil companies such as ExxonMobil and Tullow.
The transparency advocate said, “We have to recognise that even if they want to do a good job, they would be under immense pressure. I have sent a letter to the local media on this matter already, but the next thing I plan to do with a subsequent letter is to map out and define what success for the people of Guyana is, where this matter is concerned. My worry is that SARA could, if they don’t do a good job, end up blessing something that is actually bad.”
Dr. Mangal continued, “They may say ‘yes we checked. There is no evidence so we are not doing anything.’ So what you have in effect is a government entity that has by all accounts, allowed the oil companies to defraud the country.”
He added, “So Guyanese need to be very clear about what success is. Success is getting the hundreds and possibly billions of US dollars back to the State. Success is not SARA saying we investigated and did not get evidence.”
Further to this, the former Presidential Advisor said that if SARA is looking for correspondence or evidence of wrongdoing on this matter then it is quite silly. Dr. Mangal said the fact that companies that hardly have assets and little experience in the oil business were granted the oil blocks is sufficient evidence to rescind the licences. He insisted that it is a clear case of the country being defrauded.
The anti-corruption advocate said that if SARA does not pursue this issue appropriately then President David Granger would be well within his right to say the nation was cheated and the licences have to be withdrawn.
Dr. Mangal said that the Head of State would have an opportunity to take a major step to protect Guyana on this matter and rectify it since the country needs to see value for its resources.
The news of the investigation by SARA into the oil blocks was first reported by Bloomberg.com which quoted the agency’s head, Dr. Clive Thomas, as saying that the Stabroek, Kaieteur and Canje Blocks, all operated by ExxonMobil, will be part of the inquiry, as well as Orinduik Block operated by Tullow. The Kaieteur and Canje Blocks were given out by the Ramotar administration just days before the 2015 General and Regional Elections.
Kaieteur News had exposed how the contract signed between the Donald Ramotar administration and ExxonMobil for the Kaieteur Block leaves the nation saddled with $31.4M in pre-contract costs.
The Production Sharing Agreement (PSA) does not give any details on how this sum was arrived at. It only states, “The sum of US$150,000 (is) in respect of all costs incurred by Contractor prior to the Effective Date.”
According to Ratio’s website, Exxon holds a 35 percent interest in the Kaieteur Block, which totals approximately 13,535 sq. kms. It is also the lead operator.
Holding 25 percent of the rights is Ratio Guyana Limited which was renamed Cataleya Energy Limited. It should be noted that Ratio Guyana Limited represents a joint venture partnership between ExxonMobil subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) and Cataleya.
Cataleya on its own, holds 25% of the petroleum rights in the Block while Hess holds 15%.
The Kaieteur Block is particularly significant since it is adjacent to the Stabroek Block, where the Liza discovery was made by ExxonMobil in 2015. Liza was the first oil discovery in Guyana and 11 additional discoveries have since been made in the block area.
To date, the total proven reserves in the block amount to more than five billion barrels of oil.
Esso’s Head of Public and Government Affairs, Deedra Moe, confirmed that an environmental baseline survey is being pursued on the Kaieteur Block to get a sense of the current conditions. She said that this has to be done before planning for future drilling.
Further to this, Moe said that this survey is in keeping with the fact that the company has work commitments on all of its blocks. “And we make sure we’re fulfilling those commitments,” added the official.
GIVEAWAYS
The Kaieteur Block operators were also able to capture very favourable terms in the contract that it signed with the Ramotar administration.
Exxon and its partners enjoy the right to use as much production as may be needed in its Petroleum Operations in the contract area for transportation and terminal systems. All quantities of any discovered oil so used or lost would be excluded from any calculations of entitlement.
The Contractor also enjoys the right to send abroad, via an export point chosen, all petroleum to which it is entitled to free of any duty, tax, or other financial impost and to receive and retain abroad, all proceeds from the sale of such petroleum.
The Kaieteur Block operators were able to secure in the PSA, provisions which allow it to be free of paying import duties on all equipment and supplies for operations. And these can all be freely exported when the operators are ready without paying any duties.
As it relates to taxation, the Kaieteur Block PSA says that the contractor, its shareholders, members, partners, or affiliated companies are subjected to no tax payments, save and except for income and corporate tax. They are also exempted from the Property Tax Act.
While the PSA only allows Guyana to benefit from a one percent royalty, the PSA states that the Minister may remit in whole or in part or defer payment of any royalties payable by the contractor.
BE THANKFUL AND GRATEFUL TO THE FOREIGN EXPLOITERS
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