Every Man, Woman and Child Must Become Oil-Minded (Part 66)
Introduction
Mr. David Patterson, Minister of Public Infrastructure, offered a commendably prompt but strange response to last week’s column by way of his December 8 letter to the editor “The 2019 budgetary allocation has nothing to do with natural gas”. Strange because Mr. Patterson appears to have set out to contradict the statement in Column 65 that it was unclear how an ocean floor mapping exercised announced by him will cost and where it is provided for in the 2019 Budget. Having agreed that there is no budgetary allocation, in compliance with the Constitution, there can be no such activity in 2019.
But Mr. Patterson adds further confusion to the matter by seeking to deny that he spoke with Stabroek News regarding statements on any ocean floor mapping exercise, provoking a direct response from the editor of the Stabroek News that one of its reporters did in fact speak to Minister Patterson for the purposes of the article. It is surely very troubling that Mr. Patterson, a senior Minister, can be so careless and forgetful that he cannot recall a matter as significant as this.
Patterson as a member of President Granger’s Quartet on oil and gas is surely expected to demonstrate a reasonable level of knowledge about this very important sector. Yet, one of his more infamous statements was that the PPP/C had allocated all the oil blocks and there was none left for the APNU+AFC Coalition to allocate, a statement contradicted by the fact that the Coalition shortly thereafter entered into Petroleum Agreements with oil companies for oil blocks. The concern about Mr. Patterson’s memory and more importantly his competence is underscored by the fact that he is responsible for one of the largest budgetary allocations of any Minister of this Administration.
So close on Mr. Patterson, since there is no budgetary allocation in 2019 for natural gas, there is no corresponding activity and it is important for him to recognise that should he attempt any such expenditure, he would be in breach of the law.
Confusion reigns
Now on to another reported matter in the media about the sector. An article in the Stabroek News of December 7, 2018 headlined “US$11.6m loan from IDB targets oil and gas governance, clean energy” identified as the “specific objectives” of the loan programme first, the development of a management and planning framework for Guyana’s oil and gas sector, and the second, the development of a policy framework so that Guyana may diversify its electricity generation matrix using cleaner or renewable sources.
While the executing agency identified for the loan is the Ministry of Finance, it can be reasonably assumed that Mr. Patterson’s Ministry will have a big hand in the project, as indeed, the Ministry of the Presidency under which the Department of Energy falls. One hopes that the IDB which is providing the finance for the exercise is clear on the allocation of responsibilities and the outcome of the project involving such significant overlap.
It gets even more confusing when we read about the policy commitments of the first tranche. These are:
- creation of the Department of Energy (DE) within the Ministry of the Presidency to take over responsibilities related to the governance and development of Guyana’s oil and gas sector; and
- approval by the DE of a draft roadmap to develop Guyana’s oil and gas institutional framework, and;
- design of a model contract for future Production Sharing Agreements (PSA) by the DE and presented to Guyana’s Ministry of the Presidency (MoP).
Post facto justification
Let us look at the first and third of these for now. The first thing to note is that the first has already taken place and it would be a colossal waste of resources to now, post facto, to seek to justify the decision by President Granger and the Cabinet to create a department several months ago. When the Department was announced, President Granger had in fact raised the possibility of the Department being elevated into a full-fledged Ministry sometime in the future. To take a loan to pursue a strategic objective that will soon be changed seems to me an exercise not only of extravagance but of irresponsibility and recklessness.
While I have never felt that Granger’s largest ministerial government in post-Independence Guyana could even be remotely justified, it is clear that Oil and Gas warrants its own ministry rather than being a Department in some super-ministry that is too large for proper management. In other words, the earlier that Ministry is created, the better it will be, even as others are thrown into the dustbin of bad experiments.
As an aside, that is why I am a strong advocate of constitutionalising the names and number of ministries in place of the whimsical situation that now prevails.
Another production sharing agreement?
The question that arises as I try to find a rational justification for another billion dollar loan, is whether the particulars and purposes of the loan were the brainchild of Finance Minister Mr. Winston Jordan or whether the whole idea arose at Cabinet and whether or not the question of a Ministry versus Department has now been laid to rest. This Coalition has a mandate to manage, not to chop-and-change or undermanage, and it needs to show that it has the capacity to do so. Unlike his colleague, Mr. Jordan may not find it necessary, or have the time to provide answers to the public on major policy initiatives, or on matters like loans taken out in their names, but someone on behalf of the government needs to do so. Too often, we have to glean government policy from some spending document, as in the case of the effective suspension of the office of the Commissioner of Information, or from the announcement of some loan as in this case.
The other issue of concern is what is referred to as the third commitment of this loan – the design of a model contract for future Production Sharing Agreements (PSA). In the oil and gas sector, this Government seems unthinking and unable and unwilling to learn, and not a little confused! After months of rambling that now that Guyana has been de-risked in oil and gas, a new approach to the development of the upstream oil and gas sector is necessary, we return to the same concept that will see us lose at the very least, hundreds of millions of real dollars annually. It ought to be reasonably evident that there are about twelve key variable elements in the profit oil model of PSA’s and that this so called exercise for which part of the loan is to be expended, can be done by way of a desk exercise in a matter of days by any reasonably competent person.
Several countries are moving away from this type of profit oil production sharing agreement into a gross production sharing agreement, but Guyana seems committed to a backward model. And there are other models as well such as the concession type of agreements which would be consistent with the statutory type of ownership of petroleum resources. I had on more than one occasion accused the PPP/C Government of taking any loan on offer. This Government is showing how similar to the PPP/C it really is.
