Oct 23, 2020 News
Kaieteur News – For new and emerging oil producing states, it is advisable that policy leaders put in place strong criteria which would be used for assessing companies interested in oil and gas blocks, says Chatham House, a non-governmental organization based in London since 1920.
According to the international advocate for transparency and good governance, it is critical for governments to establish strong prequalification criteria since such a mechanism would help to weed out companies that do not have the capacity to carry out the work programmes for exploring such assets. In fact, Chatham House stressed that having a prequalification criteria is actually more likely to result in the most qualified company being selected to explore and develop the oil or gas block.
In its documented advice to new and emerging oil producers, Chatham House stressed, “Governments have to concern themselves with keeping out the ‘bad’ companies.” To cement its argument, it referenced the words of Charlie Scheiner, from the NGO La’o Hamutuk in Timor-Leste. He had said, “It’s not just well-established companies which should be attracted, but those with records of opacity, negligence, theft or other damaging activities which should be actively kept out. Unfortunately, small countries with weaker regulatory systems and less experience could be easy prey for more rapacious, less responsible corporate actors.”
Speaking to another benefit of having the prequalification criteria in place, Chatham House said it would help new and emerging producers identify companies that are not publicly listed for trading. Companies which are publicly traded would have their conduct and financial statements and assets scrutinized on a regular basis by key international bodies.
In opting for companies which are not publicly traded, Chatham House warned that it would present significant risks and require greater due diligence efforts to ascertain that those businesses are honest and capable. It was further noted that a country’s pre-qualification process should be in the open so that citizens can understand how governments will go about selecting suitable and financially capable candidates.
It went on to state that general terms for prequalification should be laid out in the petroleum law, with more detailed rules to be included in regulations while adding that prequalification terms should include criteria related to financial, technical and organizational capabilities.
In the case of Guyana, there are no strong prequalification criteria in the petroleum laws for companies which are interested in acquiring oil blocks. Guyana’s laws state, “(1) No licence shall be granted— (a) to an individual, unless he is a citizen of Guyana; or (b) to a body of persons, unless it is— (i) a company; or (ii) a corporation.”
In light of such ambiguous provisions, the leaders of the day thought it wise to grant in 2015, two of the nation’s prime oil blocks, Kaieteur and Canje, to Cateleya Energy Corporation (formerly Ratio Energy Limited) and Mid Atlantic respectively. Both are industry unknowns. From then to now, both do not have the financial capacity, experience, or technological assets to explore much less develop any discoveries in the two blocks. In acknowledgement of this fact, both companies quickly sold out more than 50 percent of their interests in the blocks to experienced companies like ExxonMobil, Total S.A and Hess Corporation so that they could explore and develop any resources found. The true owners of those companies got millions of US dollars richer while Guyanese got nothing.
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