APNU has expressed dismay at the government’s draft Petroleum Activities Bill and said that it should address direct spending from cost oil.
The government last week released the bill which is intended to replace the Petroleum (Exploration and Production) Act 1986 and a two-week period for comments was set aside,
Yesterday, a statement from the Office of the Opposition Leader, raised several reservations and said more detail will be provided when the legislation is presented to the National Assembly. Statements form the Office of the Opposition Leader usually reflect the views of A Partnership for National Unity (APNU).
The statement said that the Bill, in tandem with the country’s financial management laws, should address the issue of government spending on infrastructure directly through cost oil, as this form of unregulated expenditure could lead to high-level corruption and misuse and waste of public funds.
“At minimum, such company/government agreements must be tabled in parliament for scrutiny, debate, and approval — as for any other government spending of the people’s money”, the statement said.
Cost oil is being used to finance the controversial gas to shore to energy project even though this had not been subject to parliamentary approval.
The statement from the Office of the Opposition Leader said that the draft bill shows that the government continues to take an apathetic approach to establishing a Petroleum Commission. It said that the mandate, powers and functions of the commission should be integrated within the Petroleum Activities Act, similar in pattern to the Guyana Geology and Mines Commission and the mining sector.
The Petroleum Commission had been a promise of the PPP/C government even before it entered office in August 2020 but legislation for it is still to be presented by the government.
In relation to insurance and liability coverage, the statement said that the Bill is muted on insurance and liability issues, despite the serious legal disputes that have arisen in the courts.
It said that the Bill potentially provides a good opportunity to tighten Guyana’s legislative framework so that citizens can be confident that ExxonMobil assumes full liability for all environmental and industrial damage and accidents, (including oil spills) both in response to and outside of all claims and demands.
The statement added that the bill does not address the principles and rules that should govern the process for the auction of offshore oil blocks. Such principles and rules should promote transparency, consistency, and predictability and should cut opportunities for corruption, insider trading, and flipping of leases or concessions.
The statement added that the PPP/C government has shown a disdain for feasibility studies, even studies provided for by the Stabroek Block PSA and that this is unacceptable and such studies should be mandated by legislation.
The main opposition also took aim at the question of the auditing of claimed oil expenses.
“As audits are pivotal in ensuring the country gets its rightful share of oil revenues and are the main mechanism for oversight of company operations, timely and incisive audits must be explicitly mandated by legislation. The petroleum activities law, in tandem with the country’s financial acts, must mandate the timely conduct of audits and the timely release by the government of audit results to parliament and the public. Penalties should be instituted on companies for the deliberate provision of false, incomplete, and deceptive information during an audit”, the statement said.
The government has been sharply criticised for not formally presenting the findings of the first independent audit that had been done by UK firm IHS Markit.
Among the major findings in the audit report was that 12.8% of the US$1.67b expenses claimed by ExxonMobil and its partners could be disputed by the Guyana Government. The percentage that can be queried translates to US$214.4m – roughly one fifth of the amount injected into this year’s budget from oil and gas revenues. The audit pertained to the period 1999 to 2017. The audit had been commissioned by the APNU+AFC government. The final version of the report after reconciliations was submitted to the PPP/C government in March 2021 – more two years ago. The report has still not been publicly released but Stabroek News has reported extensively on it.
The statement from the Office of the Opposition Leader said that while the Bill addresses reducing or deferring royalty payments to the government by companies, there is no reciprocal or in-fairness provision for upping royalty rates in situations where companies benefit from sustained high oil prices.
“Such thinking should be included in the Act, without unduly jeopardizing the predictability of the investment climate or fiscal regime. Legislation should make provisions for a price-based, pre-set sliding or variable royalty rate, such as what obtains in the local gold industry”, the statement said.
The statement said that the bill is deficient in terms of its silence on the Extractive Industries Transparency Initiative (EITI) framework. The statement said that the law must obligate oil companies and the Guyana Revenue Authority to provide information promptly and fully as requested by the Guyana EITI Secretariat in fulfilment of its mandate.
“Let us recall that EITI is aimed at improving transparency and accountability in the management of revenues in the oil, gas and mining sectors. It has a robust yet flexible methodology for disclosing and reconciling company payments and government revenues in implementing countries. EITI therefore promotes better governance in countries rich in natural resources and seeks to reduce the risk of diversion or misappropriation of funds generated by the development of a country’s extractive industries”, the statement noted.
The statement added that several members of civil society have also complained that two weeks is not long enough for public comment on documents as significant as a Bill that governs the vital oil and gas industry.
On June 19, the Ministry of Natural Resources, on behalf of the government announced the release of the draft bill for public consultation.
In a statement, the ministry said that the Petroleum Activities Bill “introduces significant improvements and safeguards related to safety, emergency response, cross border unitisation, supervision and monitoring requirements, and authorises the minister to prescribe regulations about key administrative and operational aspects of exploration and production activities. It also expands the scope of regulation to include storage and pipeline transportation aspects of the oil and gas sector and empower the government to regulate activities associated with geological storage of carbon dioxide”.
It said that it is expected that the bill will be supplemented by regulations that will follow in the coming months and provide the government the necessary toolbox for responsible and efficient management of the petroleum activities within the Guyanese economy.
The bill is available for public feedback for a period of two weeks ending Monday, 3rd July 2023. It can be accessed on the following websites: www.nre.gov.gy and www.petroleum.gov.gy. All comments should be sent via email to the Ministry of Natural Resources’ Permanent Secretary at jmckenzie@nre.gov.gy during the feedback period.
