Need for a Commission of Inquiry into the Petroleum Sector – Part 2

Every Man, Woman and Child Must Become Oil-Minded (Part 60)

Introduction

Following last week’s call for a Commission of Inquiry into the Petroleum Sector, more than a handful of individuals approached me enquiring whether the call was serious and what would be the expected outcome. After the spate of Presidential Commissions of Inquiry out of which practically no action was taken, it is not surprising that many persons are cynical about another Commission of Inquiry (COI). My response to those persons was to ask whether they are satisfied about the controversy which surrounds this nascent but critical sector, which will soon dominate Guyana’s economy and indeed all aspects of life in Guyana in as little as ten years.

Nor can anyone be satisfied about the uncertainty surrounding any depletion policy and the rate of extraction of petroleum under the 2016 Petroleum Agreement signed with Esso, Hess and CNOOC. They must surely worry about the implications of the quadruplicating of the country’s petroleum reserves following further discoveries by the three and the nearly dozen or so other oil companies that have been issued with Prospecting Licences.

Caught up in the announcement of new discoveries every few months, the Government has sought to reassure the public that the State has the power to dictate the rate of exploitation of those resources. Whether or not it has the power to do so when licences have a finite life is debatable and a COI may help to address and get around it. 

What too will be the impact of accelerated production of fossil fuel on the economy and any costs in the form of fossil taxes may be exigible and who will bear it? For all the endless talk about Guyana becoming a petroleum economy, not only the average but every Guyanese is in the dark about a pricing policy to apply to Guyana’s share of the revenue to be paid in barrels of oil equivalent. Will Guyanese have to endure the same high prices which we currently pay, or will there be some relief in recognising the exclusive State’s ownership of all hydrocarbon resources? Expressed another way, will the pricing policy regarding petroleum products be different from the policy regarding sugar, for example.

And recognising that the benefits of petroleum increase dramatically when the oil is processed onshore, will Guyana continue to hold fast to an initial study that cast doubts on the feasibility of a refinery to process about twenty thousand barrels of oil per day? In fact, where does the breakeven point lie in any new feasibility study?

And on a more mundane matter, what is the likely unit cost of producing a barrel of oil which crucially determines the share of the oil revenues which Guyana will receive as its take?

On the parentage of the petroleum agreements, we have heard so much about the Janet Jagan 1999 Agreement and its “tweaking” (his word) by Raphael Trotman in 2016 to give the world what must surely be the very antithesis of what a modern petroleum agreement ought to look like.

And finally, though not finally, the elephant in the room but let us whisper it–the Venezuelan question!

These, I submit, are some of the issues which Guyanese will no doubt like to hear discussed and interrogated in the most open and disciplined environment of a COI in which under oath, persons who have purportedly acted in the name of Guyana will be required to answer straight questions.

 

Participants

Now who would I like to see called as witnesses at such a COI? In no particular order, key persons and participants would be Mr. Newel Dennison, Commissioner (ag) of GGMC; Mr. Robert Persaud, Minister of Natural Resources in the last Administration; Mr. Donald Ramotar, former President; Mr. Raphael Trotman, Minister of Natural Resources; Mr. Joseph Harmon, Minister of State in the Ministry of the Presidency; Foreign Affairs Minister Mr. Carl Greenidge; Dr. Mark Bynoe, newly-appointed Head of the Department of Energy in the Ministry of the Presidency; Dr. Vincent Adams, an expert in the petroleum sector; and Civil Society Activists Mrs. Annette Arjoon-Martins, Mr. Ramon Gaskin, Mr. Nigel Hinds, Ms. Melinda Janki, Mr. G.H.K. Lall and Dr. David Singh.

Also to be called would be representatives of the oil companies which hold prospecting licences and some of our own other Guyanese who have expertise which they can share.

Ideally, I would like to see a seven-person Commission headed by a Norwegian and comprising experts from Botswana, Chile, Canada and Trinidad and Tobago and two Guyanese.

 

Terms of Reference

Here are some of the matters I would like to see addressed by such a COI.

1. The origin and source of the Model Agreement used for the June 1999 Petroleum Agreement signed by President Janet Jagan and Esso Exploration and

Production Guyana Limited; 

2. Factors influencing the decision to grant to ESSO a significantly greater number of  blocks than anticipated in the petroleum legislation;

3. The circumstances and negotiations leading up to the 2008 Addendum;

4. Particulars of the application, approval and conditions regarding the farm-in by Shell into the operations of ESSO etc.; 

5. Political considerations which may have impacted on the issue of any other licences prior to and after May 2015;

6. The circumstances leading up to the announcement of the May 2015 discovery;

7. The circumstances leading up to the June 2016 Petroleum Agreement and any opinion on the legality of all the provisions of the Agreement;

8. The Signing Bonus under the June 2016 Agreement;

9. The case for and against a Refinery in Guyana by the State or the private sector;

10. The challenges and compatibility of a Green Economy in a Petro-State;

11. An appropriate legislative and regulatory frame work for the petroleum sector;

12.The Dutch Disease;

13.Sovereign Wealth Fund;

14.Natural gas

Granger’s Call

I am unable at this stage, having observed the unpredictability of President Granger, to guess whether he will respond favourably to a call for him to use his prerogative power to set up such a COI. I sincerely hope that the private sector, civil society, individuals, the parliamentary opposition and even the member parties of the Coalition Government will recognise the necessity for such an Inquiry. I do not believe that there is anyone in Guyana who has all the answers to the issues and questions raised above, and those which have not been raised.  Whatever information and whatever knowledge those in authority possess, they obtained as representatives and trustees of Guyana. They, therefore, owe a duty not only to answer questions but to enlighten all other Guyanese in the interest of current and future generations. In my view, there can be no greater act of patriotism than to participate fully in such an exercise.

We have to wait and see.    

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