If government believes or has evidence that there are illegalities in ExxonMobil’s and partners’ operations offshore, it will make an impromptu visit despite the contract saying that the minister must give seven days’ notice, Minister of Natural Resources, Raphael Trotman says.
“I will say this: If there is a need for an immediate inspection, it will be done. It will be done,” Trotman told Stabroek News during an interview last week.
“If we suspect at any time that there is anything illegal or believe there is a violation of our law, or an act of criminality is being perpetuated, we would [visit immediately],” he added.
Since the release of the contract late last year, Trotman, and the APNU+AFC coalition government have been lambasted for the clause that critics say appears to give the company time to put operations in order before a visit.
“The Minister, through duly appointed representatives, upon providing the contractor with at least seven (7) days’ notice, shall be entitled to observe the petroleum operations conducted by the contractor at his sole cost and expense and at all reasonable times to inspect all assets, records and data kept by the Contractor relating to such petroleum operations. In the exercise of such rights under this paragraph the Minister shall not unduly interfere with the Contractor’s petroleum operations under this agreement,” Article 9 (e), in the section ‘Records, Reports and Information; Confidentiality’, states.
One vocal critic, accountant and civil society representative Ramon Gaskin, waded into government about the clause during a presentation he held at the National Library. “It is beyond comprehension why Guyana’s minister would have to give notice to an operator that is bringing up oil and gas that belongs to this state,” he told attendees.
But Trotman says that while many are quick to judge, the clause in the contract is very similar to one signed between landlords and their tenants, which requires the landlord to give notice before visiting the property.
“If anyone is familiar with contracts, and some of these commentators are, they would know any contract was subject to inspection. I use a very basic landlord and tenant contract as an example: – The landlord has a right to visit but reasonable notice has to be given to the tenant. That is standard in contracts. People will complain and say all kinds of things but anyone, if they are serious about a contracts, knows that there is that,” he said.
The Natural Resources Minister, who has since given up the responsibility for the petroleum sector, emphasised that the country’s citizenry can rest assured that if there is suspicion with merit or evidence of unlawful actions offshore, government would be the first to fly to the location with requisite personnel.
But he reminded that although the clause speaks to a seven-day notice for the minister’s visit, the Laws of Guyana give the Guyana Revenue Authority (GRA) the right to have instant inspections and if there were suspicions of any illegality this law trumps everything else.
“It is not unreasonable in contracts to give reasonable notice…at the same time, our laws give certain powers to GRA for instance to have instant inspections. What you have there [in the contract] is a period of reasonableness which is standard in most contracts,” he said.
Within the remit of the GRA also, Trotman said, was the conducting of audits of invoices submitted by company.
The Auditor General was also singled out when Trotman was asked if government would be seeking to have the $460M in pre- contract costs submitted by Exxon’s subsidiary, EEPGL, audited.
He informed that for audits there were agencies responsible for different aspects of works under the contract and it is for this reason that one would see an overlapping of responsibilities and agencies when the Department of Energy is formed.
‘Good exercise’
He said that for the Minister to order an audit there would have to be a basis for why one was needed and it could not be based on mere insinuation of fraud. “We must first acquaint ourselves with the industry. You don’t do an audit just because somebody says do an audit or you find yourself every month auditing,” Trotman said.
“I would suggest that an agency independent of the GGMC or the Ministry of Natural Resources, say the GRA or the AG’s department. It is a good exercise (the US$460M audit) if we are first to look at how did we go through our cost recovery. It is not a bad exercise, but I can assure you, I have no basis for recommending an audit,” he added.
But if the GRA or AG’s office take to auditing the financials submitted by the company, the David Granger-led administration will not stand in its way and will give the autonomous and constitutionally insulated agencies the full support they need. “Government will not stand in the way of an audit. We don’t believe that if GRA or the AG’s office wants to audit we will stop them, we will welcome that,” Trotman said.
However, Trotman said that he was satisfied with the GGMC’s feedback on the US$460M that it was not excessive and is in keeping within the estimated margins of the company’s proposed scope of works over the 17 years of exploratory and seismic works.
He had pointed this newspaper to GGMC Head Newell Dennison to explain that agency’s verification system.
Dennison explained that typically in accounting arrangements for Production Sharing Agreements, pre-contract costs represent certain accepted expenditures by the company that have occurred prior to the signing of the agreement and that Exxon has to date submitted the US$460M invoice for its geological and geophysical costs from 1999 to 2016, the point when the new contract was signed.
He said for the Liza offshore wells project, the total payback figure would be about US$5B.
The GGMC Commissioner (ag) pointed out that while some persons may posit that there is no verification system for government to know of amounts spent by the company, this is far from the truth as there are ways of corroborating.
“They have to present … their financial costs to us in relation to those exploration activities and we can and will verify…say for 1999 they say we spent X on geological and geophysical works we undertook we have ways of knowing…that is an aside to the fact that they also have to report to their country and shareholders of their activities and books,” he said.
However, he did not go into detail as to how and what mechanisms would be implemented.
‘Gaining experience’
Trotman believes that the GRA and the AG’s office could undertake an audit of the US$460m in preparation for the more rigorous auditing of financials with much revenue projected to pour into the country from production in 2020.
“Like our sovereign wealth fund I had suggested that we collect some of the (other) royalties so that when the oil comes we are not just dealing with oil. Not from a point of view of suspicion but gaining experience of how in the future we can improve our sector in terms of cost management. We work in conjunction with the GRA and both agencies could deal with strengthening their capabilities. This could be a place where we want to go and do some exercises on,” Trotman said.
During his recent visit here, British Professor of Economics and Public Policy, Sir Paul Collier, said he told the coalition Cabinet that strict oversight measures will be needed to monitor the accuracy of tax and cost submissions. He also said that capacity building needed to be addressed.
“Don’t assume that you can just trust them to pay the right amount of tax. They don’t,” he said, as he gave an example where a Nigerian Finance Minister had the books of oil companies in that country audited for the first time and discovered that about US$350M was owed.
“Build a specialist team that monitors the taxes. You monitor it,” he implored while pointing out that a large number of persons was not needed to have an enforcement structure. He pointed to Norway where only about 40 persons are part of the tax enforcement body. “You don’t need a big team… you don’t need as many as 40 to learn the intricacies of the industries,” he said.
