20 key areas Govt. must urgently address
Ill-prepared oil industry…
By Kiana Wilburg, Aug 09, 2020 , Source - Kaieteur News Online - https://www.kaieteurnewsonline...st-urgently-address/
Before oil production began in December 2019, former President David Granger and his administrative team had received numerous lessons on what need to be put in place before a drop of oil was extracted and sold.
Granger’s counseling on how to best prepare Guyana for the looming revenues came from the World Bank, the International Monetary Fund (IMF), the United Nations Development Programme (UNDP), Chatham House, the Natural Resource Governance Institute (NRGI) and a slew of other internationally renowned bodies and experts. This counseling was being administered over a period of approximately five years. But when one examines the advice given versus what the new Government under the People’s Progressive Party/Civic (PPP/C) has taken over and must now build on, it leaves most transparency advocates with the firm conclusion that Granger has left Guyana completely ill-prepared for oil and gas. Not even half of the fundamentals for the efficient governance of an oil industry are in place.
One example—which does not begin to touch the tip of the iceberg—relates to a 2016 report from the UNDP that called for the government to complete an oil policy before moving to review the nation’s archaic petroleum laws. The reasoning for this approach was quite simple- the UNDP report that was authored by Trinidadian petroleum expert, Anthony Paul, noted that the policy is the foundation for what is to come.
It sets the stage and outlines the vision of the country regarding the kind of regulation it wants to have for the sector. Without that vision, one would be shooting in the dark.
To put it more simply, the policy can be likened to a plan for that dream house before it is built. That plan will say how many bathrooms, bedrooms and windows a homeowner would want. That plan then gives the builder a clear idea of what the end product must be.
Instead of following those sage words, the Granger administration went ahead and awarded a US$1.2M contract to an American law firm, Hunton, Andrews, Kurth LLP, to review Guyana’s oil laws.
The UNDP document which Kaieteur News has reported on extensively, also underscored the importance of due diligence for all contracts that awarded. Even that advice was ignored. It took the investigative work of this newspaper to expose that the law firm hired to modernize the nation’s legislative framework, is actually registered as an EXXONMOBIL LOBBYIST!
On the foregoing premise, Kaieteur News will examine some of the key pieces of advice the Granger administration failed to act on as well as some of the critical areas the new government must seek to address with haste.
This examination will be done in a multi-part series to show how the new government, using the advice and lessons already given, can begin to manage the present well, fix past mistakes and set the stage for a prosperous future.
1) Review of the Local Content Policy 2020: This document that was completed by an ExxonMobil associate, Dr. Michael Warner, does not have provisions which put Guyanese first in the industry. It does not even require that oil companies and their subcontractors ensure that at least one percent of the services they use are Guyanese. It also hides from public scrutiny, all reports submitted by companies on their local content efforts. Kaieteur News examined more than 30 policies across the world and none of them included such provisions.
2) Putting in place appropriate technology offshore to monitor the measurement of oil remotely.
3) Designing a roadmap to use a portion of the oil money to build sustainable industries
4) Outlining benchmarks for Corporate Social Responsibility
5) Establishing a Depletion Policy
6) Establishing a Decommissioning Policy
7) Outlining a structure for what is to be expected in Field Development Plans
8) Strengthening key auditing agencies, specifically the Office of the Auditor General
9) Strengthening institutions that will be responsible for the expenditure of the oil money-including the Ministry of Finance, the Ministry of Public Infrastructure and the Ministry of Health.
10) Improving Guyana’s capacity to monitor and record emissions offshore, particularly in the case of the Environmental Protection Agency
11) Providing resources to the EPA so that it can make unannounced visits to the FPSOs while following safety standards.
12) Hire technical experts needed within the Ministries of Natural Resources, EPA, the Guyana Geology and Mines Commission (GGMC), the Guyana Revenue Authority (GRA) etc.
13) Improving and making public, Guyana’s National Oil Spill Contingency Plan
14) Review of massive tax concessions/ tax holidays. Example: provisions in oil contracts that allow tax exemptions on capital gains tax, personal income tax and withholding tax
15) Updating policy/laws/regulations regarding direct and indirect transfers of interests in offshore blocks
16) Establishing a Petroleum Commission
17) Implement software solutions for compliance monitoring and for operating requisite controls for expenditure of oil money
18) Update laws and regulations to address issues of ring-fencing, transfer pricing (and other financial loopholes/issues), health and safety of workers, monitoring of the environment (regarding issues such as flaring and stiff penalties for such infractions), pre-qualification criteria for oil blocks, etc.
19) Outlining a vision for the oil sector following consultation with citizenry
20) Strengthen and increase systems for reporting on decisions in the oil and gas industry
