Non-disclosure attracts EITI attention

US$18M signing bonus

…Regional head says MSG may have to include
controversy in official report

By Jarryl Bryan

The fact that Government collected a legitimate US$18 million signing bonus from oil giant ExxonMobil but failed to disclose this transaction to the nation has not gone unnoticed by international watchdog Extractive Industries Transparency Initiative (EITI).
Guyana became a member of the group just two months ago, with its candidature application submitted in August in Oslo, Norway.
When contacted by this publication for a comment on the controversary, Regional Director of the EITI International Secretariat, Dr Francisco Paris, related via email that he was well aware of the issue.
Paris, who has responsibility for Latin America and the Caribbean, said EITI anticipated that Guyana’s Multi-Stakeholder Group (MSG) would use its judgement to include the signing bonus in its report.
Paris noted that the first report on Guyana is expected to cover the 2016 fiscal year.
According to Section Four of the 2016 EITI Standard, titled ‘REVENUE COLLECTION’, the organisation “requires a comprehensive reconciliation of company payments and government revenues from the extractive industries. The EITI requirements related to revenue collection include: (4.1) comprehensive disclosure of taxes and revenues; (4.2) sale of the state’s share of production or other revenues collected in-kind; (4.3).”
Paris noted that the Standard sets out requirements for descriptions of each revenue stream, “related materiality definitions and thresholds” to be disclosed in the report. In order to establish materiality definitions and thresholds, Paris explained, the Multi-Stakeholder Group should consider the size of the revenue streams relative to total revenues.
The regional executive made it clear that the Standard mandates that revenue streams, inclusive of discovery, production and signature bonuses, have to be included in the report. Other revenue streams include profit oil and taxes, royalties, dividends, licence fees, and other significant payments.

“In Guyana’s case, the MSG must decide the scope of Guyana’s EITI first report, including fiscal year(s) to cover and material revenues to be included,” Paris stated. “The first report is due on 25 April 2019.”
Guyana’s candidacy to EITI was approved during that body’s 38th International Board Meeting, held in the Philippines. Guyana officially submitted its application to the International Secretariat of EITI in Oslo, Norway, in August.
Government officials had hitherto always either denied that Government had receiving a signing bonus, or had pleaded ignorance of this development. But, earlier this month, proof came to light that Government had collected a signing bonus when a letter dated September 2016 and addressed to Bank of Guyana Governor Dr. Gobind Ganga had instructed him to set up a special account for the money.
This forced Government to admit receiving the money; and there has since been much criticism of the subterfuge, with Government explaining that the money was not disclosed because of national security implications.
Government has defended itself by saying that, notwithstanding the secrecy, no part of this money was touched, and that it was to be used to pay legal fees arising out of settling Guyana’s border controversy.

MSG
Ahead of the last round of countrywide outreaches in July, a Multi-Stakeholder Group was formed. It comprised government institutions, mining companies, and civil society organisations.
This group had developed a work plan for the first few years of implementing the EITI, and will oversee the activities with support of the GYEITI Secretariat in Guyana. The National Coordinator for the Guyana EITI Secretariat (GYEITI) is Dr Rudy Jadoopat. The MSG itself is comprised of a total of 12 representatives equally drawn from the Government, the business community and civil society.
The Government representatives include Natural Resources Minister Raphael Trotman and Guyana Revenue Authority Commissioner Godfrey Statia. Industry representatives include Exxon Country Manager Rod Henson, and Guyana Gold and Diamond Miners Association President, Patrick Harding.
Under the EITI Standard, companies publish what they pay to Governments, and Governments publish what they receive in an annual EITI country report. In many countries, most of the revenues from natural resources accruing at subnational levels are not derived from company payments to local government entities, but from transfers to Central Government.

Depending on the revenue-distribution frameworks in place, these transfers can be a considerably larger source of revenue for subnational entities than taxes and fees collected at local levels.
The revised EITI Standard requires that such transfers are reported, where mandated by law and where material.
Where companies are legally or contractually required to make social contributions, these must be disclosed under EITI standards. Where countries collect significant revenues from the transportation of oil, gas and minerals, such as pipelines, the Government would also be required to disclose the revenues received.
Validation is procured and managed by the EITI International Secretariat, rather than by implementing countries. Countries undertake validation more frequently, with compliant countries being revalidated every three years, as opposed to every five years under the old rule.
Guyana’s first EITI Report must be published within the next 18 months, and the country will be required to commence validation within two and a half years. Where validation verifies that Guyana has made satisfactory progress on all of the requirements, the EITI Board will designate the country as EITI-compliant.
The EITI is a global standard to promote the open and accountable management of oil, gas, and mineral resources.

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