Every Man, Woman and Child in Guyana Must Become Oil-Minded Part 28

Was the signing bonus really a grant?

Introduction

The final, belated and reluctant admission by the Government of Guyana that it received a signing bonus from ExxonMobil, seems to have caused increasing curiosity, not least because the amount disclosed is a rather odd-sounding US$18 million. While President Granger and his Foreign Minister Carl Greenidge were forced to admit the receipt of a bonus after ExxonMobil had named a figure, neither of them has volunteered critical and relevant information. Accordingly, President Granger, Vice President Carl Greenidge and Natural Resources Minister Raphael Trotman are kindly asked to provide information on the following:

a. the reason for renegotiating the 1999 Agreement and whether it was an initiative of the Government or ExxonMobil

b.the names of the Guyana negotiators and the leader of the team;

c.corresponding information on the opposing negotiating team(s);

d.the location(s) at which negotiations took place;

e.the period over which such negotiations took place;

f.whether the team had met with Cabinet and had been given any negotiating brief;

g.how the figure of US$18 million was arrived at and what was Guyana’s starting negotiating  position in respect of the number of blocks, relinquishment of blocks, profit share, cost restrictions, taxation, royalty, local content insurance, and the environment;

h.whether the team was given a mandate to conclude an agreement, or was required to report back to Cabinet;

i.whether the unlawful grant to ExxonMobil’s predecessor of ten times the number of blocks permitted by law formed part of the negotiations;

j.whether ExxonMobil’s two other Joint Venture Partners were part of the negotiations and agreement;

k.why only ExxonMobil of the three paid a signing bonus.

Competence and Integrity

The revelation of the signing bonus has done serious damage to the competence and integrity of this Administration in petroleum matters. Not that it was particularly high in the first place although many Guyanese were prepared to accept its pronouncements on transparency, accountability and integrity.  They did so even aware that the level of competence in business affairs in the APNU+AFC Government is appallingly low, with failed businesses not isolated to any single Minister.

Over the past thirty months, Raphael Trotman, a lawyer by profession, has shown himself incapable of reading and understanding basic provisions of the Petroleum Exploration and Production Act (the Act) and brings no negotiating experience to the table (other than over legal fees). It was truly embarrassing that eighteen months into his job, Trotman did not know the origin and scope of the confidentiality provision in the Act, or how section 51 of the Act dealing with taxes operates! It was at best a gamble to consider Trotman capable of being part of a major negotiating team, let alone its leader.

Minister Greenidge is arguably the best in the Cabinet at negotiations and can regale listeners for hours on his discussions with the IMF, the World Bank and Paris Club Creditors under Hoyte’s Economic Recovery Programme, and ACP countries after he left Government. But his recent gratuitous defence of ExxonMobil has done much to damage his reputation for impartiality and the defence of the national interest.

The Minister of Finance Winston Jordan also has considerable experience in negotiating with multilateral financial institutions and his post-graduate economics degree is obviously an asset. With a proper mandate and a less aggressive style he could and should have derived much more from the negotiations than what is really a pittance for a signing bonus.

Granger himself seems hardly capable of asking tough questions of his negotiating team and did himself and his reputation as a former businessman little credit with his failure to understand what an escrow account is! It really is a challenge to identify any individual in the Cabinet who was/is capable of asking a single relevant question on the negotiations.

It may have escaped attention but when one looks at the famous letter written by the Finance Secretary to the Governor of the Bank of Guyana the subject is: Signing Bonus Granted by ExxonMobil! I know the Finance Secretary as a man who chooses words carefully. If he says it is a grant by ExxonMobil, he ought to be taken at his word.

Not a bad contract

The Administration had a wonderful opportunity to correct the grave flaws of the 1999 Janet Jagan Agreement which granted Exxon’s predecessor company a no tax, no sliding scale profit share with inadequately expressed obligations to bear the full cost of any environmental harm inflicted by the offshore operations. While President Granger has given an undertaking that the APNU+AFC agreement will be released to the public during this December, the expectation that it would be much of an improvement may be unrealistic. In an interview with Trotman reported in the Stabroek News of March 4, 2017, he described the 1999 contract as “not altogether a bad contract”.

All Guyanese should be incensed that any Minister – let alone the one who exercises stewardship over precious, non-renewable resources – should consider it “as not altogether bad” that its Government – any government – would grant to any person ten times the legal limit on petroleum blocks. That the Leader of the AFC failed to protect the national interest when he had not only an opportunity, but the duty to rectify it, is reprehensible. For the next thirty years, and possibly more, Guyanese will have to live and suffer with the folly of this man and the government he represents. And all because of US$18 million dollars which is then stashed away to be spent unconstitutionally and unlawfully.

Conclusion

The incompetence continues. Two Sundays ago, ExxonMobil was part of a symposium on Disaster Planning should there be a catastrophic event from the oil operations. Now, you would think that the Minister responsible for the environment would play a prominent role in such an exercise. It perhaps will come as no surprise that the Ministry of the Presidency missed this opportunity to show not only that it was aware of the dangers but to reassure the public.

The issues raised above are as real as they are serious. On the other hand, the absence of competence in the petroleum sector is just as real as it is serious. To consider this a learning curve issue is dangerous.

Comments  

Absence of rules on thin capitalisation will hurt Guyana

Introduction Regulations made under the Petroleum Exploration and Production Act require the application for a prospecting licence to be accompanied by a statement giving particulars of the applicant’s financial status while in the case of a production licence, the application must give full information as to the applicant’s financial status.

By ,

Excessive spending (and borrowing) can undermine Sovereign Wealth Fund

Introduction In the course of his presentation of Budget Speech 2018 delivered on November 27, 2017, the Minister of Finance announced that the Government of Guyana would be partnering with the Islamic Development Bank (IsDB/the Bank), through the Malaysia Agricultural Research and Development Institute (MARDI), to update the expertise and technology in rice production through a Reverse Linkage Project to the tune of US$863,000.

By ,

The 1999 and 2016 Petroleum Agreements Compared – Annexes

Introduction In this the 39th column I wrap up the comparison of the 1999 and 2016 contracts by looking at Annex D which is completely new in the 2016 Agreement.

By ,

Every Man, Woman and Child in Guyana Must Become Oil-Minded – Part 38 

Introduction Column 37 which appeared last week dealt with the classification of costs and as indicated there, attention now turns to what Annex C describes as Pre-contract costs.

By ,

Your browser is out-of-date!

Update your browser to view this website correctly.

We built stabroeknews.com using new technology. This makes our website faster, more feature rich and easier to use for 95% of our readers.
Unfortunately, your browser does not support some of these technologies. Click the button below and choose a modern browser to receive our intended user experience.

Update my browser now

×