Dear Editor,
Though this may be an obvious point to the analyst community, it is important that the wider Guyanese community understand that multinational companies such as Exxon register their investment vehicles in a low-corporation tax jurisdiction and not in the country where their headquarters are situated for a specific reason; to cap their financial exposure per project.
The investment in Guyana is owned by Esso Exploration and Production Guyana Limited (Esso) which was incorporated in The Bahamas. Similarly the Chinese partner in this Guyana investment, CNOOC which is headquartered in Beijing, China is also not exposed because the vehicle fronting for them is called CNOOC Nexen Petroleum Guyana Limited that was incorporated in Barbados. Same thing for Hess Corporation that is headquartered in New York City, but their Guyana vehicle is incorporated in the Cayman Islands.
So if this oil spill happens (the divine forbids), then the people of Guyana will be allowed to sue for restitution. But from whom? They cannot sue these headquarters because legally they are ring fenced from the entire transaction. If Guyana sues in US Courts there is already a precedent set where the 2nd US Circuit Court of Appeal in New York in 2016 blocked the enforcement of an US$8.6 billion judgment against Chevron over oil pollution in Ecuador. The bottom line remains that these multinationals have a template for avoiding legal accountability anywhere in the world.
The only parties Guyana can successfully sue and enforce against are the Bahamian, Barbadian and Cayman Island companies but they are what you call shell companies with finite assets on their books.
The sole purpose of these shell companies is to pay the bills out of the earned income generated from the waters of Guyana. In short, if it happens, Guyana’s available oil profits will be paying for Guyana’s oil spill and if it becomes zero at any point in time, then we are on our own.
Multinational companies usually just keep a small fraction of their profits in the local investment vehicle. They use a mechanism in finance called transfer pricing to move a significant portion of those profits out of the local books into other books that Guyana cannot and will not be able to make a claim against. How they do it? All sorts of high priced oil consultancies and oil services contracts will be signed between the Guyana investment vehicle and agents of the respective three headquarters for services rendered while keeping the legal entities separate and distinct (ring fenced). The disadvantage to Guyana from such a situation is that the headquarters of these three partners can pull cash out of the Guyana investment vehicle as they see fit but the Guyana investment vehicle has no power to access any of this cash from these headquarters if things go wrong.
The bottom line, if one carefully reads this Petroleum Agreement between the Government of Guyana and these investors they will find enough clauses to support a position that if any mishap occurred at the Production Site, Guyana is on its own. For emphasis, let me reiterate – Guyana is on its own if things go wrong in the oil operations.
Therefore, how prepared is Guyana at cleaning up its ocean front if an oil spill happens, the divine forbids? Is the EPA ready? Is the Maritime Authority ready? Is there any institution in Guyana ready for this eventuality? Will they be ready by 2020? It is time for Guyana to plead its case to the Americans, British, Canadians, European Union, and any country who has the competence and skill to help so that we can properly fund, equip, train and establish a Coastal Environmental Unit in the EPA. This reality does not need a rocket scientist to fix but time is of the essence. The new Head of the EPA Dr. Vincent Adams is a very capable man who gained experience from his time in the US Department of Energy; let us put him to work.
Yours faithfully,
Sasenarine Singh,
Maryland, USA
