By Kiana Wilburg
GRA’s Commissioner General, Godfrey Statia
When it comes to monitoring the quantity and quality of oil produced by Chevron and the like, most regulators around the world have taken every precaution possible, be it through laws, policies and contractual provisions, to guard against foul play.
Guyana, in this regard, is the oddball.
A perusal of the nation’s Production Sharing Agreement (PSA) with ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), CNOOC and Hess, shows that there is no provision in place which speaks to the country’s right to verifying the operator’s oil production.
Other nations like Trinidad and Tobago, for example, have rigid rules, agreements and regulations in place on this matter. With respect to its PSAs with oil firms, Trinidad has an entire section on Measurement.
Provisions 19.1 and 19.2 under that Section say, “All Petroleum produced, saved and not used in Petroleum Operations shall be measured at the Measurement Points approved in the Development Plan. The Measurement Point shall be at the end of the facilities for which the cost is included as a recoverable cost of Petroleum Operations under the Contract.”
At provision 19.3 it adds, “The Production shall be measured in accordance with the sound and current practices and standards generally accepted in the international Petroleum industry. All measurement equipment shall be installed, maintained and operated by Contractor.
“The Minister shall have the right to inspect the measuring equipment installed by Contractor and all charts and other measurement or test data at all reasonable times. The accuracy of Contractor’s measuring equipment shall be verified by tests at regular intervals and upon the request of the Minister, using sound and current means and methods generally accepted in the international Petroleum industry.”
Upon discovery of a meter malfunction, Trinidad’s PSAs make it clear that the contractor shall immediately have the meter repaired, adjusted and corrected and following such repairs, adjustment or correction shall have it tested or calibrated to establish its accuracy. Upon the discovery of a metering error, the nation also requires that the contractor have the meter tested immediately and the necessary steps taken to correct any error that may be discovered.
In the event a measuring error is discovered, the nation sets out in its PSAs that the Contractor shall use its best efforts to determine the correct Production figures for the period during which there was a measuring error and that the corrected figures shall be used. In determining the correction, the nation notes in its oil deals that the Contractor shall use, where required, the information from other measurements made inside or outside the Production Area.
The oil contractor signed to a PSA is also required to submit for the Minister’s approval, a report detailing the source and nature of the measuring error and the corrections to be applied.
If it proves impossible to determine when the measuring error first occurred, PSAs noted that the commencement of the error shall be deemed to be that point in time halfway between the date of the last previous test and the date on which the existence of the measuring error was first discovered.
TRAINING FOR GUYANESE
Last year April, this newspaper raised the issue of having systems in place to monitor oil offshore with the Commissioner General, Godfrey Statia.
Statia had said that special officers would be trained to monitor metered oil production by ExxonMobil. But efforts to follow up with him on this matter recently proved futile.
Be that as it may, the tax chief on several occasions, said to Kaieteur News that he is aware of how important meter monitoring is to ensuring accountability and transparency in the oil and gas sector. The Chartered Accountant had said that this type of monitoring is imperative as there are documented cases where the failure to do so has cost nations billions of dollars in revenue.
International anticorruption agencies have also been warning nations on the road to first oil, like Guyana, to be vigilant when it comes to the determination of the volume of oil produced.
In this regard, the Canada-based organization, Publish What You Pay (PWYP), has published a detailed report documenting how many countries have suffered for failing to have an independent team monitoring the oil being metered and assessed by oil companies.
The organization has said that the Norwegian Petroleum Directorate notes that, “even small deviations in the volume of production can have a significant impact on government revenues.”
In their example, an error of just 0.35 percent at one of their metering stations would amount to a loss of four million NOK (US$660,000).
PWYP also stated that ensuring fair taxation depends not only on tracking the volumes of the resource produced, but also that they are applied against each relevant fiscal instrument.
The anticorruption entity also stressed that the solution to protecting government revenues from under-reporting of production by oil companies is effective monitoring of both the quantity and quality of the natural resources extracted and exported. A failure to address this, it said has resulted in oil producing nations losing billions of dollars in profits.