… But Guyana still has nothing in place
The Kingdom of Saudi Arabia, a veteran in Petroleum production, has managed to take the wealth of its populace to enviable heights. Getting there meant putting in place strict systems to monitoring the Petroleum operations at its reserves. It understood that the absence of this would result in significant value leakage.
The custodian of the Kingdom’s Petroleum is the National Oil Company (NOC) of Saudi Arabia, Saudi Aramco.
In a 2008 CBS: 60 Minutes documentary, Journalist Lesley Stahl was given a tour of Saudi Aramco’s command centre by its former Chief Executive Officer (CEO), Abdullah Juma’ah. He described it as the nerve centre of the company’s operations; a room with a 220-ft digital screen, where engineers scrutinise and analyse every aspect of the company’s operations.
“Every facility in the Kingdom, every drop of oil that comes from the ground is monitored in real-time in this room, and we have control of each and every facility, each and every pipeline, each and every valve in the pipeline. And therefore, we know exactly what is happening in the system from A to Z,” Juma’ah explains.
It is evident that there is nothing about Saudi oil operations that is not known in that command centre.
Since Guyana discovered oil in commercial quantities in 2015, some have waxed about Guyana’s potential to be like the Saudis, who live in one of the richest countries in the world. But four years after the announcement of the significant oil find in the Stabroek Block, Guyana has nothing in place to monitor the offshore operations of oil companies like ExxonMobil, not even a legal basis to do so.
The country is put to shame by Saudi Arabia and, closer to home, its sister CARICOM country, Trinidad and Tobago. Unlike Guyana, the twin-island nation devotes an entire section of its Production Sharing Agreements (PSA) with oil and gas companies to the strict measurement of its oil and gas. Those provisions dictate the country’s right to measure the production and inspect the equipment used in the process.
In Guyana’s case, as if it was not bad enough that it has no legal basis to measure the Petroleum being produced, the PSAs also let oil companies take as much from the production as they need for their operations, with no limit. This issue was brought to the fore by international lawyer, Melinda Janki, who had said that Guyana’s revenues become undercut by this “willfully obscure” provision and Guyana’s inability to monitor the oil coming up.
Furthermore, Petroleum Advisor to Government, Matthew Wilks, had said back in May that a separate agreement is being worked on to ensure the precise metering of Guyana’s oil; a Crude Lifting Agreement.
Commissioner General of the Guyana Revenue Authority (GRA), Godfrey Statia, told Kaieteur News last year that special officers would be trained to monitor metered oil production. He had acknowledged that measuring oil operations offshore is vital to ensuring accountability and transparency, positing that there are documented cases where the failure to monitor has cost oil producing nations to lose billions of dollars in revenue.
The Canada-based Publish What You Pay (PWYP) has published a detailed report, which quotes the Norwegian Petroleum Directorate as saying that “even small deviations in the volume of production can have a significant impact on government revenues.”
The Directorate’s example stated that an error of just 0.35 percent at one of its metering stations would amount to a loss of four million NOK (US$660,000). PWYP had urged that protecting Government revenues and ensuring fair taxation depends not only on tracking the volumes of the resource produced, but also that they are applied against each relevant fiscal instrument.
Several international anti-corruption agencies have urged vigilance when it comes to the determination of the volume of oil produced. Though this matter is so dire, there is yet to be an update by Statia, even though First Oil is less than a year away.
CBS: 60 Minutes Documentary shows Saudi Aramco’s Command Centre (Source: CBS) See video below.
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