Mid-Atlantic Oil and Gas to receive tax concessions on par with Exxon

Winston Jordan

Mid-Atlantic Oil and Gas Incorporated is now legally entitled to all of the same tax concessions which ExxonMobil’s local subsidiary and its partners enjoy following a motion which was passed last week in the National Assembly.

In accordance with Section 51 of the Petroleum Act, Finance Minister Winston Jordan tabled the motion which had been gazetted on July 30th of this year.

The Motion resolves, “That this National Assembly, in accordance with Section 51 of the Petroleum (Exploration and Production) Act No.3 of 1986, affirms the Petroleum (Exploration and Production) (Tax Laws) (Mid-Atlantic Oil & Gas Inc.) Order 2018 – No. 26 of 2018 which was made on 30th July, 2018, under Section 51 of the Petroleum (Exploration and Production) Act, No. 3 of 1986 and published in an Extraordinary copy of the Official Gazette dated 30th July, 2018.”

Mid-Atlantic Oil and Gas was incorporated here on April 8th, 2013, with Fazal Hosein of 1124 Paria Avenue, Chaguanas, Trinidad and Tobago, listed as a director. At that time, Nicholas Chuck-A-Sang, who is now Deputy Head of the Ministry of Natural Resources’ Petroleum Directorate, and Hewley Alphonso Nelson, who is now the Marriott Hotel’s Chairman, were also listed as directors. Chuck-A-Sang ceased being an executive of the company on October 1st, 2015 and was replaced by Glenn Roland Low-A-Chee.

Under the Production Sharing Agreement the current government renewed with Esso Exploration and Production Guyana Limited (EEPGL) and its partners in 2016, the tax regime, where it would not pay VAT, excise tax or duties on its operations, was retained from the deal which was originally struck in 1999 with the then Janet Jagan-led administration.

The company can also export all petroleum to which it is entitled free of any duty, tax or other financial impost and can receive and retain abroad all proceeds from the sale of such petroleum, among many other benefits.

Article 21 of both agreements allows the contractors and sub-contractors to “import free of duty, VAT or all or any other duties, taxes, levies or imposts, all equipment and supplies required for petroleum Operations.”

The Article goes on to list 11 items before adverting to a list of 333 in Annex D. The lists in both agreements appear identical though two pages of the alphabetised items are missing from the released copy of the 2016 agreement.

It has since become clear that the 2016 contract was modelled on a “template” developed under the PPP/C administration as these contentious articles are nearly identical to what appears in the Mid-Atlantic agreement.

Jordan told the House that all current companies with contracts will be afforded the same privileges and, therefore, from time to time there would be similar motions.

He said that he did not want to make the motion into a debate about the overall oil and gas sector but noted that the company was local and it was important to this country. “I don’t want to make this motion into oil and gas…I really don’t want to get there. I would plead with my honourable friend to limit his interventions to Section 51,” Jordan said.

“Mid Atlantic Oil and Gas Inc. may not be Exxon or any of other majors but is important from Guyana’s stand point. It is small. It is unknown but it is in the oil and gas sector. Importantly, for Guyana, it is a local company comprising of many enterprising and well-known Guyanese. Exxon, under the same Section 51, was given these same tax reliefs and a local company, Mid-Atlantic, is also being requested to be given the same tax relief. In the future, Guyana will continue to benefit… we will be returning to this house with similar orders for affirmation,” he added.

Underscoring that equality of treatment and honouring of contracts were necessary for an attractive investment climate, Jordan pointed out that the approval of the company’s request would be demonstrative of these acts.

While the opposition agreed with Jordan and the motion was passed, their lone speaker on the motion, Irfaan Ali, said that it was a reminder that government has to plan for future contracts and to use analysis of the current ones to determine if the same tax model should be used again, given that there has been significant changes in the sector.

Pointing to the fact that this country has now moved from the unknown, in terms of if there was oil in the basin, he said that ExxonMobil alone has eight discoveries that is expected to produce over 4 billion barrels of oil equivalent. Ali believes that government has much introspection to do now that it is confirmed that the basin is derisked and this country will soon be added to the global list of oil producers.

“Did the government review the Exxon production agreement and identify areas of weaknesses so that we would not make those, or have those similar weaknesses in similar contracts? If this was done can the government share with us that review and if not why hasn’t the government completed this task?” he asked.

“With the discovery of at least 4 billion barrels of proven reserves, this scenario is completely different from the position we were in when we signed the agreements in 1999 and 2015. So we have to take this into consideration. We are now in a different situation,” he added.

He further queried if government developed a new policy to inform future negotiations and agreements.

According to Ali, his party also wants government to say if it has defined a framework to guide the negotiations of new agreements and if it has it should state where that framework is.

The PPP/C, he said, believes that discussions and agreements of future contracts must involve all stakeholders.

“We have also heard statements that major initiatives like these would have the input of the opposition, [and] key stakeholders and would be subject to parliamentary scrutiny and debate. We have seen earlier the green paper being laid. Why are these things important? These are important because they fall into the holistic context of oil and gas.  We cannot afford to get this wrong. We have a moral and ethical responsibility, a national responsibility, a patriotic responsibility… to be thorough, transparent and wholesome in dealing with this matter,” Ali stressed. 

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