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November 14 ,2021


-says more public vigilance needed to ensure accountability

As it denounced government’s negligence in failing to meet the deadline for the audit of over US$9 billion in expenses claimed by ExxonMobil, anti-corruption watchdog Transparency Institute of Guyana Inc. (TIGI) has warned that the public’s failure to hold the administration accountable will result in increased slippages in the oil sector.

TIGI says that had Guyanese held firm to the position that the government had since 1999 erred in its decision to award more oil blocks than the laws allowed and lobbied for a change when it was challenged two years ago, the forfeiture of the right to audit might not have occurred.

Fred Collins

“The latest sensational revelation that the country has lost its right to challenge some $9.5 billion of post-contract expenses through failure to audit on time is only the latest rung in the slippage on an oily slope. For TIGI this began with the breach of the 60-block maximum. We are, therefore, not surprised though we are surely disappointed,” TIGI’s head Fred Collins told Sunday Stabroek.

“You cannot decide to look the other way while serious questions are asked on what appears to be interpretation of laws in favour of special interests or to be silent in the face of questionable compliance without eventually arriving at such a point. For us it will be an event on a natural trajectory started with the signature of the 1999 Stabroek contract with Esso,” he added.

Over the past week, the Stabroek News has been seeking a response from the Ministry of Natural Resources (MNR) to no avail.

This newspaper has also reached out to ExxonMobil for comment and on Friday local representative and Media and Communications Manager Janelle Persaud said that she was awaiting clearance from the company’s legal team.

Collins said that TIGI had insisted since 2018 that the Minister [of Natural Resources] had no authority to issue the total of 26,800 square kilometers as a super-block, and should have instead of divided them into the 6 licence blocks in keeping with the law.

“The Caribbean Court of Justice ruling in the elections recount case contained a thorough discussion on why no government official has unfettered discretion and why such an action could never have fallen within the minister’s discretion. In fact, the exposition in that ruling should have raised the question as to the competence of the lawyers that drew up the 1999 contract as it clearly meant that the issue was not an esoteric point of law but a well-known principle – the Wednesbury doctrine. We know of no other review of this action, which should have been prompted by the CCJ ruling, to this day. Again, to this day we have seen no discussion as to what the root unauthorized issuance of those blocks means to the validity of the contract,” he argued.

“What we said then and what we are saying now is that a society cannot turn a blind eye to the trivialization of its laws and not pay a price. Or to put it differently, electoral laws and small-time crooks are not the only ones that matter. We cannot wait until something hits us directly to demand accountability,” he added.

Since the revelation by Vice President Bharrat Jagdeo that the post-contract expenses have not been audited since there was no local firm to do the job, government has been by critics over its nonchalance about the failure, with TIGI’s chiding being the latest.

Jagdeo told a recent press conference that ExxonMobil’s post-2017 expenditure for the Liza-1 and Liza-2 wells would not be audited as government was not able to select a strong local group to undertake it. This statement was made although the government had advertised this year for foreign firms.

“We have been very disappointed that we have not been able to select a group to do the audit of the post-2017 expenditure on Exxon. The reason is we did not have a strong local content. We had two local groups that came in but they were not strong enough. We want to build a capacity in Guyana to do this audit,” Jagdeo said.

“We think our people have enormous skills, forensic skills, auditing skills, and we are looking to see if we can’t have an arrangement where we have a consortium of local people partnering with a foreign company so we can build capacity right here in Guyana. We are disappointed that from the individual bids we did we have not been able to do this. When I get back from Scotland (from the COP26 conference)  I have asked the minister to see if we can’t get all the groups that expressed interest to see how we can partner, they can partner with a foreign company to do this audit.  We also have to build this capacity in GRA (Guyana Revenue Authority). GRA has been mandated to build a capacity to do this. But it is a disappointment because it has been quite a while,” he added.

However, there has been no information on if the MNR, as the procuring entity, had informed the companies of why they did not qualify or why the Government of Guyana never announced that none of the tenders met the required criteria. No explanation was given on why the contract was not re-advertised or if government had asked ExxonMobil to extend the two-year statutory period, given the lack of capacity here and the impact of the COVID-19 pandemic on works globally.

The Ministry of Natural Resources had been responsible for the evaluating of the financials of companies that had bid for the contract but it apparently abandoned the process without advising the procurement board.

The expiration of the deadline for the examination of the expenses means that the country has not been able to determine if the US$9 billion expenditure by ExxonMobil and partners was warranted. If the expenses were overstated, it would have caused a reduction in Guyana’s profit oil take.

Sources told this newspaper that the ministry has not said anything to the National Procurement and Tender Administration Board (NPTAB) on tenders that were submitted for the auditing of the expenses. The tenders were opened in April of this year.

It is unclear how the ministry came to be responsible for evaluating tenders, given that the statutory process lies with the NPTAB, but one source explained that oil and gas contracts are evaluated by a special body, given that it requires expert technical evaluation while the NPTAB has “administrative oversight”.

TIGI also pointed to Chartered Accountant Christopher Ram’s observation of the inconsistency between Jagdeo’s statement concerning the failure to audit, agreeing that it is “inconsistent with the Government’s own advertisement, inviting bids to audit the contract costs…”

The transparency body said that apart from allowing government’s inconsistences to pass un-objected, as fast as an error is picked up government should be made accountable, no matter how small the public may think it is.  “Had those 26,800 sq km been issued under 6 separate licenses, there would have been one material difference. The separation would have imposed a natural ring-fencing of sorts to the extent that it would have been impossible to claim that the expenses related to one well located in a licence block could be set off against a productive well issued under another licence. What the failure to ring-fence means is that, absent the natural separation into six separate licence blocks, the expenses of a well anywhere in that Stabroek block of 26,800 sq km are being set off against a productive well anywhere else within it,” TIGI stated.

“We find the development quite consistent with the long trajectory which begins with a breach of the law at the very creation of the contract, continuing with a contrived history to support certain questionable concessions, and including a conspiracy to cheat not one but two countries of taxes…clearly, the latest development is only the latest on a path downward which threatens to normalize the preposterous,” it added.

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