Oct 23, 2020 News
– Contract signed by Ramotar
Kaieteur News – The owner of the Canje Block, Mid-Atlantic Oil & Gas Inc. has benefitted from its sale of 87.5 percent of Stabroek Block ownership, but Guyana did not benefit from the payment of Capital Gains Tax on the transactions. In keeping with a series of provisions, which severely reduce Guyana’s revenue streams from its oil sector, the Canje license granted by former President Donald Ramotar to Mid-Atlantic Oil and Gas Inc. exempts the Contractor from paying capital gains tax to the people of Guyana.
Capital Gains Tax is what is charged on the sale of any property or asset. If you sell land or a vehicle, you are expected to pay this tax. The Guyana Revenue Authority (GRA) tells Guyanese that they must pay 20 percent Capital Gains Tax on any such property transaction, yet Mid-Atlantic and its rich joint venture partners are free and clear of this expense.
The contract states at Article 15.13 “… assignments of any kind between the Contractor and Affiliated Companies, as well as any assignment of any kind made in accordance with this agreement (including one to an unrelated party) shall be exempt from any duty and taxes, including Capital Gains Tax in each respect…”
The provision goes on to state that the Contractor would have to pay only a fee of US$100,000 to the Guyana Geology and Mines Commission (GGMC) – the agency which has to approve the transfer/sale. However, this newspaper’s reporting in this series in yesterday’s article noted that all fees, and any other imposts charged to the Contractor would be cost recoverable. This means that the Contractor will pay the Government the fee with one hand, and take it right back with the other. Guyana gets nothing.
This provision has forfeited millions, likely even hundreds of millions, of US dollars, in Capital Gains Taxes from the sale of interests in the Canje Block. After Mid-Atlantic received the block from Ramotar on March 4, 2015, it let little time pass before it started selling out interests in the block, transferring a stake in the block to JHI Associates, just six weeks later.
In February 2016, ExxonMobil farmed into the block with a 35 percent stake, and assumed the role of operator later that year. The French multinational, Total SE also farmed into the block in February of 2018 with a 35 percent stake.So much of the block has been sold that Mid-Atlantic, once the sole owner, only retained 12.5 percent. This means that despite doing no work in the block, the company has made big money from the license it received from Guyana, but the people get nothing in return.Kaieteur News does not know how much money was paid during the multiple transactions which led to transfers of rights. What is known is that the Canje Block is situated next to the Stabroek Block, which has already yielded 18 material discoveries amounting over 8 billion oil-equivalent barrels. That means that the right to drill this block is coveted.
When a share of the block was transferred to JHI, Exxon had already announced its first discovery in the nearby Stabroek Block. When Exxon farmed-in in 2016, it was studying its Stabroek Block discovery to determine the value of the find. When Total farmed-in, Exxon had already made six discoveries in the Stabroek Block exceeding three billion oil-equivalent barrels.
Kaieteur News submitted a request for information on these transfers with GGMC two weeks ago. There has been no response. Kaieteur News also asked ExxonMobil two weeks ago to furnish information on its farm-in to the Canje block, but there has been no response.
Every time the Canje Block changed hands, Mid-Atlantic benefitted. Yet, Guyana gained no signing bonus when the block was handed to it.
Other startling revelations include Ramotar’s failure to have Mid-Atlantic secure comprehensive insurance before he granted its exploration license, his agreement to a GY$100M debt for Guyana due to undefined “pre-contract” costs, and his commitment for Guyana to repay every cent of the one percent royalty rate stated in the contract.
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