There are important issues raised in Joel Bhagwandin’s [JB] letter in SN – March 26, 2023 that are very important for Guyana, as the new oil economy unfolds. Principles related to ownership rights and corporate funding determine future incomes earned from such ownership rights. Future tax payments are also related to the classification of corporations as commercial companies or as contractor-owned companies.
JB is an honourable analyst. How-ever, a corporate structure spelling out ownership rights should come from a legal document, not a spreadsheet model: Quote- ‘Coming back to the financing model of the Vreed-en-Hoop shore base development, the funding for the project that ExxonMobil has committed―is not a grant or an injection of equity capital’. Firstly, a commitment does not automatically reach the status of finance (liability side). If JB is correct here, quote – ‘It is actually an advance rental payment to utilize the facility (all of which is not paid upfront)’.
A rental payment by ExxonMobil and partners is an expense item (asset side) that the company and partners can recover from petroleum sales cost oil. For such mega projects, official public reporting by the oil companies’ operations in Guyana, on – or offshore, could help us understand beneficial ownership rights to these sorts of matters below:
1. Who are the landlords to such a vast project?
2. Is the landlord a private or public company? If the company is private, is there a prospectus that was advertised? (A real estate prospectus, or Prospectus, is a document used to raise capital that outlines the securities’ rules and regulations, and the company’s terms to investors).
3. Is the pre-payment expense for ExxonMobil ‘rent’ coming from recoverable cost oil, Guyana’s own resource?
Raising equity and debt finance for a public or widely held company also requires a prospectus. A loan requires minutes at a Board meeting plus a business project document, as JB alludes to. It appears that ExxonMobil could lease any of the previously issued oil blocks (gratis?) and make rental payments to the beneficial owner (corporate or individual). ExxonMobil should have ‘accountability’ disclosure responsibilities in printed and accessible reports, especially on making payments or loans out of Guyana’s cost oil funds to its projects, or to all of its oil-related beneficial owners. Does it?
Sincerely,
Ganga Persad Ramdas, PhD, MA, MS.
