Dear Editor,
Economic Advisor to the Leader of the Opposition, Elson Low, has contended that the funding of the Gas-to-shore pipeline is unconstitutional / illegal. Low, however, fails to justify his contention by citing which provision in the Guyana Constitution the funding has breached other than to cite a few out-of-context examples in Venezuela and Trinidad & Tobago. Low’s argument is based on the notion that cost oil is not subject to parliamentary scrutiny and therefore this aspect of the funding for the pipeline is unconstitutional.
Contrary to Low’s argument, the financing of the gas-to-shore pipeline from cost oil, which is cost recoverable, is not in any way unconstitutional or illegal. The financing of the gas pipeline from cost oil is part of the petroleum operation which is covered under the Petroleum Act, the Production Sharing Agreement (PSA) and the Production License. Monies that are subject to parliamentary approval are from the Consolidated Fund (CF) and Extra Budgetary Funds, as per the Fiscal Management and Accountability Act (2003). The onshore infrastructure, nonetheless, will be financed through a different mechanism which would include loan proceeds – these will be presented to the National Assembly. Additionally, at the appropriate time, all of the reports on the financing of the project are most likely to be laid out in the National Assembly.
Moreover, I would like to point Low to Annex C, section 2 of the PSA, which speaks to classification, definition and allocation of costs, and expenditures. The
financing of the gas pipeline comes under section 2.2 (d) that deals with development costs which, according to this clause in the PSA, states that these shall consist of all expenditures incurred in “the cost of field facilities such as pipelines, flow lines, production and treatment units, wellhead equipment, enhanced recovery systems, offshore platforms, petroleum storage facilities, export terminals and piers, harbours and related facilities and access roads for production activities.” It is under this clause that the financing of the gas pipeline is legitimately covered, which is treated as a development cost or capitalized expenditure that is cost recoverable.
For the sake of argument, by Elson Low’s logic, it would mean that the financing of all the FPSOs and other development costs to produce the oil and gas resource would be unconstitutional or illegal which is most certainly not the case. It should be pointed out too, that all of the costs are subject to various audits, including internal audits by the oil companies’ auditors, GRA’s audit as well as the cost oil audit. And I am also sure that these audit reports are most likely to be laid in the National Assembly at the appropriate time. As such, there is nothing unconstitutional, illegal and / or lacking transparency and accountability with respect to this major transformational project for Guyana.
Sincerely,
Joel Bhagwandin
Director
SphereX Analytics | Business
Intelligence, Financial and Economic
Analysis
