Granger’s Petroleum Advisor agrees with Jagdeo

…advocates auctioning off available petroleum blocks

President David Granger’s Petroleum Advisor, Dr Jan Mangal, has come out publicly in support of the calls by Opposition Leader Bharrat Jagdeo, and has since called for the auctioning of the available petroleum blocks.

Dr Mangal was at the time responding to queries raised and published by the Guyana Times and attributed to the Opposition Leader, who this past week raised the matter as a worrying case of cronyism evolving, wherein relatives, friends and associates of Ministers and senior Government functionaries have been incorporated into companies through complex shareholding arrangements, and are applying for exploration and production licences for oil and gas in the blocks still available.
Speaking to the need for the available blocks to instead be auctioned off rather than having preferred companies apply, Jagdeo sought to point out that a premium must be considered.
Jagdeo suggested that the world-class discovery of oil in Guyana could be compared to a ‘gold shout’, and said the moment oil was discovered, “there is a premium now to owning offshore blocks and getting an exploration or production licence”.
The Opposition Leader has since found support in the utterances of Granger’s petroleum advisor, who in a public missive over the weekend said, “The process of one-on-one negotiation, or the open door method, where the Ministry of Natural Resources negotiates directly with the interested party, exposes the country to very real risks of corrupt activities.
“There is a very serious risk of corruption with this method, due to the lack of transparency and accountability… Most countries have abandoned this method, as experts recommend against using it. Guyana should no longer be awarding petroleum acreage via one-on-one negotiations after the Liza discovery in 2015,” said Dr Mangal.
According to the President’s Petroleum Advisor, as he echoed the sentiments of the Opposition Leader, “After the Liza discovery in 2015, Guyana was in a position to use the method of competitive bidding for the award of leases…The Liza discovery de-risked Guyana, and as a consequence, all the major oil companies recognise that there is oil in the country. Hence all the oil companies will be interested in bidding for leases in a transparent way, which ensures that Guyana incorporates market forces to maximise its share.”
Dr Mangal used the opportunity to reiterate that, “the petroleum adviser’s position has consistently maintained that competitive bidding is indeed the best approach for Guyana.”
He has since called the public’s attention to a direct correspondence from May 2017 with one such oil company attempting to acquire acreage via one-on-one negotiation.
According to Dr Mangal, that company was advised by him that: “Now that Guyana is on the radar post-Liza, it is my personal view that all future acreage should be leased in a way which maximizes benefit to Guyana, hence in a market-orientated way by an open bid round, to ensure competition. And acreage should not be negotiated one-on-one between the Government and a prospective developer.”
According to Dr Mangal, the risk of Government’s friends and family illegally obtaining leases will be significantly reduced if an independently managed and well audited competitive bidding process is used.
“There is no rush to award more leases, since Guyana is already occupied with the developments in the Stabroek Block,” Dr Mangal said.
Opposition Leader Jagdeo, in similar warnings to that of Dr Mangal – of Government friends and family illegally obtaining leases – had stated that several of the local companies applying for petroleum licences “have no means whatsoever.”
According to Jagdeo, those companies he referred to as aligned to Ministers and their families, and some others, cronies, “have no means of finding hundreds of millions of US dollars to do the exploration work.”
As such, he opined that the companies in question “will get these blocks and, weeks later, they will sell the blocks without any competitive process being followed”.
Jagdeo suggested, too, that even some of the foreign companies that have been making applications had “unhealthy contacts with some Ministers and their surrogates”.
The Opposition Leader posited that were these companies to secure licences, there is the possibility of them earning tens of millions of US dollars.
He told members of the media that according to industry experts he has been in communication with, “the big companies will just buy these up (licences).”
Jagdeo used the opportunity to suggest that were President Granger serious about transparency in the sector, he would shut down the application process and instead have the blocks auctioned off.
“The process is not transparent now. They should look at the beneficiaries, the shareholders of these companies; they are very complex now. There are a lot of front people, and they should go to an auction, because now this is a valuable resource.”
Jagdeo also reminded that, given the discovery of oil, the blocks could now be sold at a premium.
“If you go to an auction, money that the middle men will make will come to the State…so if they auction off these blocks, the companies that will buy it, they don’t have to get middle men who will buy it and sell it to them without any tender in a secret process.”