Set up as the local counterpart of world renowned watchdog Extractive Industries Transparency International (EITI), Guyana’s EITI National Secretariat is likely to include several controversial occurrences in its first comprehensive report on the local oil sector.
According to the Guyana EITI Coordinator Dr. Rudy Jadoopat, his entity has been interfacing regularly with the international organisation through the Regional Directorate for Latin America and the Caribbean. He emphasized that there is an open line of communication.
He noted that the local entity is constantly in receipt of guidance notes issued by the International Secretariat. He clarified that the first report, due eighteen months after Guyana’s candidature was accepted, will cover a number of things, including the Government’s disclosure of its oil contract.
“The EITI Report must be prepared by an independent administrator. Often, it’s a
National Coordinator of Guyana’s EITI, Dr. Rudy Jadoopat
reputable auditing firm with the relevant expertise, or which can incorporate local auditing firms or auditors,” Dr Jadoopat explained.
“EITI Standards stipulate that a newly accepted EITI candidate country must submit its first EITI Report 18 months after date of acceptance. The GYEITI Report will be comprehensive, and must be made public. Disclosure of contracts, licences, beneficiary ownership, payments, receipts etc. are among the details which will be captured in the Report,” Dr Jadoopat explained.
Dr Jadoopat noted that even as Guyana seeks to follow the EITI Standard, the first GYEITI Report and an Annual Progress Report are in the works. That first report, Dr Jadoopat said, is due on April 25th, 2019.
The bonus
When it renegotiated an agreement with ExxonMobil, Government collected a
While not the only oil company in Guyana’s waters, Exxon and its affiliates have been the most successful by some stretch
US$18 million signing bonus from the oil giant. However, it failed to disclose this transaction to the nation, despite being questioned about it by the media. This continued until a leaked document forced it to come clean. Proof of the bonus came to light 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.
Government was then forced to admit receiving the money; and there has since been much criticism of the subterfuge, with Government explaining that the money was to be used to procure lawyers for Guyana’s border controversy case, when it is heard at the International Court of Justice.
Then there are issues with the contract itself. The overwhelming consensus from observers has been that the contract heavily favours Exxon. The oil company was granted sweeping tax exemptions while Guyana was granted a mere one per cent increase in royalties, among other arrangements.
Guyana became a member of the EITI Group only a few months ago, with its candidature application submitted in August in Oslo, Norway. When contacted by this publication for a comment on the controversy, 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, had said EITI anticipated that Guyana’s Multi-Stakeholder Group (MSG) would use its judgement to include the signing bonus in its report. He had 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 had explained 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 2017.
