Oct 18, 2020 News
Kaieteur News – Last week, Kaieteur News published a series of stories which exposed the damning giveaway of two prime gas fields offshore Senegal. The sequence of events and inherent red flags as outlined in an analysis by expert on oil sector corruption, Alexandra Gillies, bore a striking resemblance to what took place with the suspicious award of the Canje Oil Block offshore Guyana.
In case you missed the damning exposés, here is a recap of the Senegal red flags as exposed by Gillies and parallel anomalies with the Canje Blocks.
The Senegal giveaway ….
1) Too many red flags for Govt. not to be aware of corruption
In 2012, BBC News revealed by way of a Panorama documentary how the Senegalese government signed away two offshore gas blocks that cost its people billions of US dollars. The sweetheart deals were struck with a company called PetroTim. But this company was an industry unknown. So unknown was the company that it did not exist at the time the deals were struck with company owner, Frank Timis.
Two years after creating the first shell company, the Romanian-Australian businessman – who has a well known history of fraud, corruption, and misleading investors – created another firm which he called Timis Corp. The businessman transferred the rights from PetroTim to Timis Corp then sold it to two major oil exploration companies for billions of dollars.
With the foregoing case in mind, expert advisor on oil sector corruption, Alexandra Gillies said it is important to ask: Why did the Senegalese government choose PetroTim, an unqualified company to begin with? Why did it then let Timis transfer the rights to another unqualified? And why did the government allow Timis to sell the blocks later on?
Gillies said that these questions expose that the challenge is not one of inadequate due diligence by the Senegalese authorities, but rather, low standards which ultimately led to billions of dollars in gas wealth being lost through corrupt means.
2) Quick buying and selling of prime assets
Gillies, in her analysis, exposed that Timis who has zero experience in oil and gas exploration, created a company called PetroTim in 2012.
After he used this shell company to acquire the blocks, he created another shell company two years later called Timis Corporation and hired the brother of the President, Aliou Sall, to run the show.
Less than two months after registering the new company and hiring the President’s brother, Timis Corp sold 60 percent of the shares to American oil company Kosmos in 2014 for over US$400M.
That same year, Kosmos found major natural gas reserves. The United Kingdom (UK) oil giant British Petroleum (BP) subsequently joined the partnership and acquired 30 percent of the blocks interest which saw Timis getting more than US$200M. In 2017, BP then bought out Timis Corporation for US$250M. That company held the remaining shares in the gas blocks. BP also agreed to pay Timis at least US$12B in royalties over a 40-year period.
In total, Timis made approximately US$900M in cash within five years of acquiring the block and the 55 year-old is set for life with at least US$12B more to follow.
In order to finish this money by the time he is a century, Timis would have to spend at least US$280M every year. Since acquiring the gas blocks, Timis had committed to pay exploration costs of US$48 million dollars but he only invested US$2M before flipping the assets.
When one takes the foregoing into consideration, Gillies said that nations should always increase scrutiny followed by an immediate investigation whenever this red flag is noticed. Gillies said that the quick buying and selling of assets that belong to a nation is a red flag that should never be ignored.
3) Registered in tax havens to hide identities of real owners
When oil companies are created in a matter of days or weeks and are registered in territories that keep the identity of the real owners – the ‘beneficial owners’ – a secret, it creates the perfect condition for corruption and tax evasion to flourish. It ultimately robs the citizens who are the rightful owners of a nation’s wealth, billions of dollars.
Gillies said that a glaring example of this is the case of Senegal where Frank Timis, a Romanian-Australian businessman with a corrupt past, created two shell companies, had them registered in the Cayman Islands and the British Virgin Islands, then acquired two prime gas blocks offshore the African country. It should be noted that the Cayman Islands and the BVI are two of the world’s most top nations for providing financial privacy to corporations.
As a result of using the shell companies which are registered in tax havens as part of his corrupt scheme, the people of Senegal remain in the dark about the real owners and shareholders that are benefitting from the gas-rich fields.
4) Making awards to unqualified companies
Would you give someone who has never built a house before, all your savings to construct your dream home?
Would you allow someone who is not a doctor to perform surgery on you?
The obvious answer to these questions is a resounding NO!
It is clear that experience and a proven track record in a particular area are critical qualities to consider before giving a person or a company, an important job to do. Furthermore, if an individual would consider these two factors in their decision making process then it is expected that a government would do the same. Unfortunately, this is not always the case says Expert on Oil Sector Corruption, Alexandra Gillies. In the case with Senegal, she noted that the administration that is led by President, Macky Sall, gave away two of his nation’s most prime offshore gas fields to PetroTim, a company that has zero experience, much less a proven track record of safe development of such resources.
Gillies said companies which have no track record or experience in the industry as well as little to no finances or assets to carry out the required work programmes, are clearly not qualified to own oil and gas assets. The oil expert stressed that it is a glaring red flag that always warrants scrutiny by civil society.
5) Senegal could have gained US$ billions through competitive bidding of gas fields
Gillies was keen to note that Senegal would have gained billions of dollars revenue for the betterment of its people had it used an open and well-run competitive tender for the award of its prime gas blocks. She stressed that it would have attracted a capable company to explore the blocks. When governments decide to go another route, the expert said it should always arouse suspicion and be investigated. Gillies added that when a probe is done, there is oftentimes an element of corruption that would be detected.
1. Canje Oil block award filled with red flags
The Canje Block was awarded by the Donald Ramotar administration on March 4, 2015 days before the elections, to local company, Mid Atlantic Oil & Gas, which was incorporated in 2013 by Hewley Nelson a management professional and Nicholas Chuck-A-Sang, a geologist.Dr. Edris Kamal Dookie, who was not officially a Director at the time the company received the block, came on later and is the sole shareholder.
Several important details about the Canje Block award have evaded public knowledge, despite the fact that international transparency best practices require that the man on the street be able to access them. The same is true for the circumstances, which followed the award, as the block changed hands. The handling of the Canje license is characterized by many red flags which anti-corruption experts say warrant investigation.
2. Canje block owners sold shares six weeks after receiving block
Mid-Atlantic sold away shares in the block, a mere six weeks after it received it. Mid-Atlantic received the block on March 4 and sold stakes to JHI on May 15. The Natural Resource Governance Institute (NRGI) has noted the quick flipping of blocks without having done substantial work, as a major red flag of inquiry into possible corruption. It is notable that the principals of JHI and Mid-Atlantic, Edris Dookie and the Canadian John Cullen co-founded CGX in 1996. The companies’ directors are also linked in other ways.
Exxon farmed into the Canje license in February 2016, becoming the operator with 35 percent of the shares later that year. The sum Exxon paid for its share is unknown. In February of 2018, JHI and Mid-Atlantic also struck a deal with Total, which resulted in Total having a 35 percent stake.
3. Canje block owner incorporated in secrecy jurisdictionJHI Associates, with a 17.5 percent stake in the Canje block, has managed to stay under the radar due to its incorporation in the British Virgin Islands (BVI), which is a secrecy jurisdiction and tax haven. This is a major red flag for governments that prioritise transparency and mitigation of corruption risks. Companies registered in jurisdictions like BVI have the fortune of withholding financial information from the public about their transactions, and owners.
The company just about sprung up for the purpose of owning the Canje block. Its website, a vague collection of pages on the internet, provides very little information about itself, save and except for its ownership of the block.
It was recently announced that BVI will be creating publicly accessible registers of beneficial ownership for companies incorporated there, by 2023. By then, Guyana would have the opportunity to know who benefitted from the sale of its Canje block to ExxonMobil and Total.
4. Canje owner had no assets, proven track record, finances to acquire Canje block
Located 180km offshore Guyana, the Canje block lies in ultra-deep water. There are only a handful of companies in the world with the capability and track record to drill in ultra-deep water, including ExxonMobil, Royal Dutch Shell, Chevron, BP and Total. Mid-Atlantic is not one of them. This is why, immediately after it was awarded the block, the company started to sell off stakes.
Mid-Atlantic doesn’t even have a stable office space or website, despite it being seven years since it was incorporated, and five years since it received the Canje block. The directors who incorporated the block have no experience in oil & gas. Its shareholder, Edris Dookie has very limited experience drilling for oil, with no finds under his belt. The first company Mid-Atlantic sold to, JHI also does not have what is required. The block only finally went to capable companies starting 2016, after Exxon farmed in. Total farmed in two years later.
5. Guyana lost US$ billions by avoiding open, public tender for Canje Block
Governments around the world make big money when they award oil and gas contracts by open, competitive bidding processes. They also ensure that when such a process is upheld transparently, the best and most eligible companies are chosen to do the job. By refusing to wait, and take the time to study the basin and develop a foolproof open bidding process, Guyana likely forfeited billions of dollars in upfront revenue.
The award was made weeks before ExxonMobil announced its first discovery. Knowledge of this find could have been used in Guyana’s favour. However, the opportunity was forfeited and years later, officials continue to be silent on what transpired.
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