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- Glenn Lall calls on Govt. to correct flaws in oil contract before approving Exxon 4th project
- Stresses need for full coverage insurance; fair payment of taxes
Kaieteur News Publisher, Glenn Lall has once again called on the government to delay the approval of ExxonMobil’s fourth project – Yellowtail until a full review of this country’s oil sector is done and the necessary safeguards, including higher royalty payments and full coverage insurance are in place.
The Government of Guyana said it will approve the Yellowtail Project next month. This newspaper had previously reported that even though the Yellowtail Project, the fourth to be developed in the Stabroek Block, is poised to see its costs going beyond US$9B, it is still regarded by Hess Corporation as having “outstanding economics” that will work in the company’s favour. The American oil producer, which holds a 30 percent stake in the Stabroek Block, made this disclosure during its 2021 third-quarter earnings call.
Specifically, the company’s Chief Operating Officer (COO), Greg Hill, disclosed that the final numbers have not been decided for the project, as this would only follow approval by the government. Be that as it may, it has predicted that inflationary pressures on the market will push the cost beyond the preliminary estimate of US$9B. Hill was keen to note, however, that the “superefficient” provisions of the Stabroek Block Production Sharing Agreement (PSA) will allow for all expenditure to be recouped.
At a news conference last week, Vice President, Bharrat Jagdeo said there was the expectation that the review of the Field Development Plan and subsequent issuance of the environmental permit and licence would have been completed since December 2021. He said this did not occur as there were some setbacks.
In spite of the internal challenges, Jagdeo said, “…We are working more, and we are anticipating the completion of everything by the end of March latest. We have consultancies in place and the Ministry of Natural Resources (in review mode).” Jagdeo said too that a draft licence is already worked out and a parallel process is being conducted by the Environmental Protection Agency for an authorisation permit.
The Government of Guyana has once again selected ExxonMobil’s client, Bayphase Limited, to review the field developments plans for the Yellowtail project.
Bayphase, which is headquartered in the United Kingdom, won with a bid totalling US$423,360. The contract for the consultancy was awarded to Bayphase since January 21, 2022. The National Procurement and Tender Administration Board (NPTAB) disclosed the list of interested bidders on January 20, 2022. The other companies that submitted bids are as follows: Infinity Services in collaboration with XWells Mexico – US$617,500; Orwell Offshore-US$617,650; MSI International-US$817,761; Endeavour Management –US$598,934; Future Energy Partners Limited US$901,482; IHS Global Inc. – US$1,493,502; RPS Energy Consultants Ltd. – US$494,000; Sunstone Energy Advisory Service –US$785,040; Sproule – US$661,440; and StratOil Energy Services – US$324,080.
Kaieteur News previously reported that Bayphase is a well known client of ExxonMobil. In fact, Bayphase also works for Exxon’s subcontractors which include Schlumberger and Technip FMC.}
Meanwhile, speaking during The Glenn Lall Show radio programme (99.1, 99.5 FM), Lall who is also a prudent businessman and an advocate for a better oil deal for Guyana, emphasised that with a good oil deal every Guyanese can live the life of an oil producing country. He iterated that the Irfaan Ali administration could have and should have used the third project as leverage to rake in the billions lost in Liza 1 and 2. “Instead Jagdeo gave away that project in one day to ExxonMobil and say fatten your shareholders and left the citizens of Guyana starving… And now they got to go borrow money for the 2022 Budget…” Mr. Lall told his audience, explaining that the project is certain to rake in billions of US dollars for the citizens.
Lall underscored that having been shortchanged on the Lisa 1, 2 and 3 projects, Guyana is running full speed with the 4th project, which can be used “as the trump card to bring in billions in US dollars in this project that we lost out in the other three projects.”
Noting that the government is yet to check Exxon’s US$20B expenses from its first three projects, Lall asserted that instead focusing on doing those audits that can save Guyana billions of dollars, the Vice President is running full speed ahead to approve the 4th project with another US$10B Field Development Plan and Cost. “My fellow Guyanese listen to me carefully, Mr. Jagdeo, can put a hold on this project and force ExxonMobil to deal with Guyana the way they dealt with other countries. Exxon needs Guyana more than anything else on earth. Guyana is their lottery, their saviour, and Jagdeo can do so many things to make Guyana the Dubai the world is talking about,” Lall stated.
Additionally, Lall said the government can use this 4th project to stop this country from paying the US billions (of dollars) to the oil companies searching for oil immediately. “Our neighbour Suriname says plainly, oil companies have to suck up every cent they spend drilling, looking or searching for oil. Why is Jagdeo approving this 4th project for ExxonMobil and Guyana has to pay for another 70 holes at US$100M each, minimum, they plan to drill in this 4th project, can somebody help me here?…”
Lall said too that the government can use the approval of the fourth project, to guarantee ring-fencing provision now, which will protect and safeguard Guyana with billions of USD in savings from oil companies. Lall noted that presently “ExxonMobil is spending anywhere and everywhere then dumping those bills on Liza 1 to pay – this is why Guyana is getting little or nothing from the oil.”
The newspaper publisher argued that every country has ring fencing provision in place including Suriname, even as he drew attention to remarks recently made by Jagdeo where he said that the administration will ensure ring fencing provision goes into place with the other oil companies, but not with ExxonMobil. “You believe this man? Bharrat Jagdeo is giving ExxonMobil a free reign to do Guyana and its people what they feel like doing to us. Can you believe that?”
Paying their fair share of taxes
Turning his attention to the vexed issue of taxes, Lall said that the government can use this 4th project to ensure that ExxonMobil and the others pay their rightful taxes on every drop of oil coming out from Guyana. “We already made ExxonMobil walk away with US$720M in 2020, over a quarter of our 2022 Budget. Come 2023 that figure might double the 2022 budget.”
For the period 2019 to 2020, Guyana gave away $327B in tax exemptions in the oil sector and the Guyana Revenue Authority (GRA) has predicted that these exemptions will only continue to balloon if urgent policy changes are not made. The authority made these and other remarks in response to queries from the Auditor General’s office in its 2020 Annual Report.
The Auditor General had found that tax exemptions for 2020 alone totalled $137B in foregone revenues, representing 62.75 percent of total collections by the authority. Meaning the $137B forgone by government through tax exemptions for that period, amounts to 62.75 percent of what was actually collected by the revenue authority.
Moreover, Lall said the government can remove all the high interest rates taken on loans by those oil companies to which Guyana has to repay. “No country takes on that burden – oil companies when they go to invest in oil countries, they go with their own money and take their own risks. Guyana allowed them to take all their billions on Liza 1, 2 and 3 and agree to pay back the loans with an interest rate that we don’t even know…” Lall noted that the interest rate is another major issue that can be corrected before granting not only the 4th project but all future projects even as he questioned, “Is Jagdeo ready to do this?”
Touching on another vexing issue, Lall pointed out that Government should seek to change the two-year time limit for Guyana to audit Exxon’s expenses – something which came into sharp focus when this country last year missed the deadline to conduct cost audits. This will allow ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), to recover all stated costs for its Liza Phase One and Two Projects. Both projects total approximately US$9.5B.
Given the nation’s capacity deficiencies, international transparency bodies have strongly contended that the two-year deadline the government has accepted, along with the fact that it can only do one audit per year, is not sufficient. They have stressed that the timeline should be extended. Specifically making this point is Oxfam America. It has made this perspective known since 2015 alongside the International Monetary Fund (IMF). Oxfam America, a confederation of 20 charitable organisations which seek to fight poor governance of extractive wealth, has said that the expiration periods for audit rights are set out in petroleum contracts and tax laws. It stressed, however, that these deadlines differ from one country to the next. It noted that in Ghana and Kenya for example, the authorities there retain the right to complete auditing companies within seven years. In Peru, the time limit for audits is a minimum of four years. Even in the USA, the transparency body highlighted that audits are allowed to be completed within a minimum of three years. Oxfam warned however that even a three-year deadline is not advisable for developing countries such as Guyana, given the limited financial and human resources that are likely to delay the audit process. Further, the organisation said it is equally important to keep an eye on record-keeping provisions in the petroleum contracts and tax laws.
It said, “Oil companies should be required to keep all their records in-country for easy access by the auditors during the audit period. But once that period expires, it becomes very costly to access records and therefore practically impossible to audit them…” Oxfam warned that Guyana needs to take the auditing timeline for these costs as a matter of grave concern as it could cost the nation billions more.
To this end, Lall said if done right, the 4th oil project – Yellowtail can give every adult Guyanese a brand new car, a house and land, triple public servants salary and also triple the minimum wage in this country. He said it is time citizens make their voices heard on these issues and push their government to demand more from the oil companies operating. “You have to take a stand, we all have to take a stand because unless we do so we will remain paupers in a country teeming with wealth…” the newspaper publisher said.
Kaieteur News Publisher, prudent businessman and advocate for a better oil deal, Mr. Glenn Lall (at Centre) was at the forefront of protest actions late last year against the rushed passage of the New Natural Resources Fund law by the PPP/C Government.saviour, and Jagdeo can do so many things to make Guyana the Dubai the world is talking about.” – Glenn Lall
kaieteurnewsonline.com 02 10 2022
