Listen to Glenn Lall!

Nov 14, 2022 Features / Columnists, Peeping Tom

Kaieteur News – One of the latest Tik Tok videos by the publisher of this newspaper is thought-provoking. It subtly hints at the poor regulatory oversight and underdeveloped regulatory framework of the oil and has sector.

Glenn Lall draws a comparison between the appointment of a company to oversee the construction of the gas plant, and the failure of the government to exercise proper oversight over the expenses of the oil and gas sector. But this is not a mere lapse on the part of the government.  It boils down to the failure of the both the APNU+AFC and the PPPC governments to construct a robust regulatory framework. The PPPC had been critical of the APNU+AFC’s regulation of the oil and gas sector. It claimed that the Coalition which was in office between 2015 and 2020 failed to use that period to entrench a strong regulatory framework.

In fact, the government’s point man in the oil and gas sector, Vice President Bharrat Jagdeo, was stinging in his criticism of the APNU+AFC’s readiness for oil production. In 2019, Oil Now quoted then Opposition quoted him as saying that after 5 years of the Coalition government, the country did not have the necessary architecture to manage the sector and to ensure international best practices, transparent and accountability. He even criticized the APNU+AFC’s failure to establish a Petroleum Commission. Two years onward, his government is nowhere near establishing the Commission, the absence of which allows political operatives to exercise powers over the sector.  The government instead has spent time revamping the Natural Resource Fund Act which was enacted by the APNU+AFC and has passed a controversial Local Content Bill. But even more careless and negligent has been the PPPC’s failure to audit over US$9 billion dollars in expenses by the stipulated deadline. By any standards, local or international, the person of persons responsible for such a failure should have faced criminal charges and should have been dismissed forthwith.

The government has since undertaken the audit. But the stable door has been closed after the horse has bolted. Whatever is found now is not going to be binding on the oil companies since the deadline for filing objections and contesting claims have long elapsed. The travesty of it all is that finding and technical expertise is not a problem when it comes to developing the necessary regulatory architecture. Whatever criticisms can be hurled at the David Granger administration, the fact remains that the former President took action in this regard. Granger created a Department of Energy and brought it under his direct oversight. The Department recruited experts to advise it.

Granger also laid the foundation for improving oil and gas regulation. A US$20M agreement was inked with the World Bank. The Guyana Petroleum Resources Governance and Management Project provided for enhancing the regulatory framework and for institutional strengthening to govern the oil and gas sector. This project also included a component for the development of a fiscal management plan, something that the IMF recently demanded of the PPPC government. The Project which will end in March next year provides for the development of a Petroleum Commission. The project has not accelerated under the PPPC. When the APNU+AFC left office 21% of the loan had been disbursed. Two years under the PPPC and only 40% has so far been disbursed.

The Report Article IV Consultation by the International Monetary Fund was generally favorable to the government but relayed concerns in relation to the management of the oil and gas sector and its revenues.  While commending the government for the transfer formula in the Natural Resources Fund Act, the IMF insisted that the legislation did not provide an effective fiscal anchor and it urged the development of a medium-term fiscal framework,  a task which may prove challenging for the specialists in the Ministry of Finance  and government’s financial gurus.

It is against this background that we must consider the comments of Glenn Lall in relation to the original failure to meet the deadline for auditing the US$9B expenses as compared with the plans to have a company supervise the construction of the gas plant. The Auditor General in his annual report for 2021 reported that the Guyana Revenue Authority was unable to recruit the full complement of persons to audit the expenses. But the GRA’s audit must be distinguished from the government’s audit. The GRA’s audit is for tax purposes only and the findings cannot be shared with external persons or agencies since the Tax Act provides for confidentiality. The question which remains outstanding therefore is about what steps has the Irfaan Ali administration taken to develop local capacity to undertake cost audits. With billions of dollars in expenses being thrown at Guyana, the public needs more than the assurance that the audits are ongoing.

(The views expressed in this article are those of the writer and not necessarily this newspaper)