After chronicling dozens of missteps by various administrations in relation to the oil and gas sector, commentator Christopher Ram says the greatest threat to Guyana’s petroleum future is the current government’s failure to act with competence and integrity.
In the 192nd installment of his oil and gas column, Ram stated: “Sadly, the inescapable conclusion is that the greatest threat to Guyana’s petroleum future is no longer the (2016 Production Sharing Agreement) itself – bad as that is. It is the Government’s continuing failure to act with courage, competence, consistency and integrity. The Granger Administration surrendered too much; the Ali Administration is on course to surrender what remains”.
Stating that matters might have been very different had both the external auditors and the ministry auditors taken a firmer stance on compliance with accounting standards, Ram said these gaps fail in comparison to the absence of adequate contract administration by successive administrations.
While he said that the Granger Administration has attracted most of the criticism for saddling Guyana with the “deeply flawed” 2016 contract, he argued that the record shows a chain of failures stretching from the 1999 Agreement signed under President Janet Jagan, through its 2016 revision, and into its ongoing administration.
“These are not isolated errors. They reflect a persistent pattern of weak oversight, lax enforcement, poor transparency, and an undue deference to foreign oil companies at the expense of the national interest”, Ram contended in the column at https://www.chrisram.net/.
Among the major failures, he said that the 2016 Agreement included a commitment to pass certain tax exemptions, including a permanent tax concession.
Then, after its return to power in 2020, he said that the PPP/C reneged on its repeated commitment to renegotiate the 2016 Agreement and to set up an independent Petroleum Commission.
He further argued that the “entire team at the Ministry of Natural Resources appears to lack the commitment, the capacity or the expertise required to oversee the Petroleum Agreement effectively. With any of these qualities, it would not permitted the persistent deficiencies in accounting, reporting, auditing and operational compliance that have marked the Agreement since its signing under the PPP/C and its re-signing under the APNU+AFC Coalition”.
Ram listed a plethora of institutional and governance failures.
These include:
i) Failure to establish an independent, professional Petroleum Commission.
ii) Failure to maintain a proper institutional separation between regulator and regulated entity.
iii) Failure to learn from the experience of other petroleum-producing countries where weak oversight, cost inflation, regulatory capture and information asymmetry have transformed a blessing into a curse.
In terms of contract administration and regulatory enforcement, he cited:
iv) Failure to scrutinise and transparently approve the pre-contract costs claimed by the contractor.
v) Failure to deal transparently with costs that are not automatically recoverable under the Agreement.
vi) Failure to impose ring-fencing protections when opportunities existed.
vii) Failure to enforce relinquishment provisions.
viii) Failure to ensure full compliance with statutory requirements governing petroleum operations.
ix) Unwillingness to seek adjustment of rental and other nominal annual charges.
Ram said that the greatest disappointment to Guyanese has been the Ali Administration’s abandonment of its promise to put Guyana first.
“Having inherited an Agreement it rightly condemned, it has chosen not only to defend it, but in important respects to sweeten rather than reform it – all favourable of the oil companies”, Ram charged.
Discussion