Home Letters Funding of Wales Gas Pipeline Not Illegal or Unconstitutional
Economic Advisor to the Leader of the Opposition, Elson Low has contended that the funding of the Gas-to-shore pipeline is unconstitutional/illegal. Low, however, failed to justify his contention by citing which provision in the Guyana Constitution the funding has breached other than to cite a few out-of-context examples in Venezuela and Trinidad & Tobago. Low’s argument is based on the notion that the cost of oil is not subject to parliamentary scrutiny and therefore this aspect of the funding for the pipeline is unconstitutional.
Contrary to Low’s argument, the financing of the gas-to-shore pipeline from cost oil which is cost recoverable is not in any way unconstitutional or illegal. The financing of the gas pipeline from cost oil is part of the petroleum operations which is covered under the Petroleum Act, the Production Sharing Agreement (PSA), and the Production License. Monies that are subject to parliamentary approval are from the Consolidated Fund (CF) and Extra Budgetary Funds, as per the Fiscal Management and Accountability Act (2003). The onshore infrastructure, nonetheless, will be financed through a different mechanism which would include loan proceeds – these will be presented to the National Assembly. Additionally, at the appropriate time, all of the reports on the financing of the project are most likely to be laid out in the National Assembly.
Moreover, I would like to point Low to Annex C, section 2 of the PSA which speaks to the classification, definition, and allocation of costs, and expenditures. The financing of the gas pipeline comes under section 2.2 (d) which deals with development costs which, according to this clause in the PSA states that these shall consist of all expenditures incurred in “the cost of field facilities such as pipelines, flow lines, production and treatment units, wellhead equipment, enhanced recovery systems, offshore platforms, petroleum storage facilities, export terminals and piers, harbours and related facilities and access roads for production activities.”
It is under this clause that the financing of the gas pipeline is legitimately covered, which is treated as a development cost or capitalized expenditure that is cost-recoverable.
For the sake of argument, however, by Elson Low’s logic, it would therefore mean that the financing of all of the FPSOs and all other development costs to produce the oil and gas resource would be unconstitutional or illegal which is most certainly not the case. It should be pointed out too, that all of the costs are subject to various audits including internal audits by the oil companies’ auditors, GRA’s audit as well as the cost oil audit. And I am also sure that these audit reports are most likely to be laid in the National Assembly at the appropriate time.
As such, there is nothing unconstitutional, illegal and/or lacking transparency and accountability with respect to this major transformational project for Guyana.
That said, Elson Low ignores the slew of tangible benefits that this project, once materialized, will accrue to the country and the people. It is commendable on the part of the Government which managed to have the oil companies agree to finance this project from cost oil which has a direct positive impact on the economy. This is a major way in which the Government has successfully sought to maximize the in-country value through the financing of this project from cost oil – something that the Opposition will never acknowledge.
I can also say this much that it wasn’t an easy task to get ExxonMobil to agree to finance the gas pipeline since this is a major cost that would reduce profit oil for the oil companies, but at the same time, aid in deriving substantial direct and indirect economic benefits for Guyana.