Jagdeo, Ali makes the policies, we implement them – Oil minister on running sector

Nov 16, 2023 ExxonMobil, News, Oil & Gas

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By Shervin Belgrave

Kaieteur News – Minister of Natural Resources, Vickram Bharrat on Tuesday at his year end press conference made it clear that Vice-President, Bharrat Jagdeo and President Irfaan Ali make all the decisions on the management of Guyana’s oil and gas sector.

His role, Bharrat said, is only to implement the policy decisions and manage the sector on a day-to-day basis.

“…Vice President is in charge of the sector at a policy level, we work on a day-to-day basis at the Ministry of Natural Resources,” Minister Bharrat said.

He continued, “Managing the oil and gas sector is a multi-agency task and that is the approach that we are taking,” while reiterating. “The Vice President as I mention, and President has overall responsibility of the sector, (making the) policies. We manage on a daily basis, the implementation of those policy decisions,” Minister Bharrat further added.

Bharrat then added that the Guyana Geology and Mines Commission (GGMC) and the Environmental Protection Agency (EPA) also have their respective roles to play in the extractive sector. The GGMC, he said, has more of a technical and regulatory role.

Jagdeo’s policies for the oil and sector especially when it comes to ExxonMobil’s operations in Guyana, have come under heavy criticism by many Guyanese. They believe that the government must renegotiate a lopsided deal that the previous government had signed with American oil giant for the Stabroek oil block in 2015.

Both Ali and Jagdeo agree that the deal is one of the worst in the world. However, the two leaders chose not to renegotiate it, claiming they respect the sanctity of the contract.

The current oil deal is riddled with loop holes that allow ExxonMobil and its partners to rake-in billions in profits, leaving Guyana at a disadvantage.

Apart from a two percent royalty rate that is considered very low when compared to the norms in the industry, the contract lacks ring fencing provisions. Without ring fencing, Guyana can lose hundreds of millions of US dollars in profits.

If ring fencing mechanisms were included in the contract, then it would prevent the oil company from recovering costs from a producing oil field -already paid off for- to develop future ones.  This means Guyana will never be able to recover a full 50-50 percent from any oil field in the Stabroek Block because the absence of the key mechanism that allows Exxon to continue recovering 75 percent of the total production as costs.

Many Guyanese have taken to the streets in protest, calling on the government to include this key provision. However, both Jagdeo and Ali are firm in their policy decisions to not include this or any other provision that could increase the country’s take from its oil resources.

The Stabroek Block contract also gives the oil companies and its expat workers a tax-free ride and does not provide for adequate insurance coverage or a parent-company guarantee to protect the country in the case of an oil spill or any other disasters related to oil operations offshore Guyana. Guyana is powerless too, when it comes to approving ExxonMobil’s large US billion dollar budgets.

Additionally, the contract is considered so weak that it allows to ExxonMobil to commit ‘skullduggery’ as regards spending monies from the Stabroek block.

Recent audits of Exxon’s expenditure from 2018-2020, has exposed such misuse of funds by the oil company and as a policy maker, VP Jagdeo has shown no interest in arming future oil projects with stiff penalties to prevent such reoccurrences.

A recent Kaieteur News article reported that according to the 2016 Stabroek Block contract, there should be no spending of revenues from that block to offset expenses in another block, such as Canje or Kaieteur.

However, when auditors reviewed a sample of ExxonMobil’s expenses incurred in the 2018 to 2020 period totalling US$7.3B, they found that the Stabroek Block revenues paid for services related to the Kaieteur and Canje blocks. To compound this alarming state of affairs, auditors also uncovered that Guyana’s oil profits were also used to cover expenses that were not related to the effective running of Exxon’s operations offshore.

Auditors attached to Ramdihal & Haynes Inc., Eclisar Financial, and Vitality Accounting and Consultancy Inc with backing from Martindale Consultants, said Exxon used a portion of Guyana’s profits to cover social media ads to promote the company, puppet shows, staff parties, school fees for the expats’ children, and private drivers amongst other things which are not cost recoverable.

With audits still to be done on the third, fourth and fifth oil projects in the Stabroek Block worth approximately US$30B, Kaieteur News recently asked the Vice President if future projects would be armed with stiff penalties if auditors continue to find a pattern of abuse or skullduggery.

The Guyanese official said that the government can only rely on its right to audit Exxon’s expenses which is enshrined in the 2016 Stabroek Block deal. He noted that this right is also afforded to local authorities via all agreements.

He further explained that, “The right to audit gives you a chance to see whether the expenditures were done illegally or they were inflated and therefore you have a mechanism to address it.” The Vice President said the mechanism the government has at its disposal is to instruct the oil company to return all disputed expenses to the cost bank.

Jagdeo noted that, “This is how the world of economics (and) accounting works. So there is a mechanism for that, for the government to have oversight over this, and it’s been in all the contracts. That’s the mechanism that we are pursuing.”

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• Dr. Bharrat Jagdeo, Minister of Natural Resources, President Dr. Mohamed Irfaan Ali, Vice President, Vickram Bharrat

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