Reference is made to the letter submitted by the Ministry of Natural Resources (MNR) dated July 7, 2024 in reply to my letter on July 1, 2024. In their letter, MNR made the false claim, among other things, that the numbers I used to describe the Hess and CNOOC financial statement were pure fiction. While I appreciated that the MNR responded to my letter, I was, however, surprised that a Government Agency can engage in an ad hominem attack, claiming that the numbers I used were pure fiction.
Just to remind those responsible for the MNR, a government department is not an attack agency that attempts to belittle its citizens; instead, among the main duties of a government Ministry/Agency is the task of providing timely and accurate information; and answering questions posed by the public. If this important task cannot be achieved, it should be obvious that Guyana will be going nowhere very fast, as its critical institutions would have failed the Guyanese people. Now to the question at hand. In my letter of July1, 2024, I posed a question on whether there was a shortfall in Royalty and Profits in 2023? In analyzing this question, I reported the combined financial data derived from the published 2023 Income and Expense Statements for both Hess and CNOOC. And in order to target the main issue, I have copied the 2023 Income and Expense Statement for CNOOC in the Table below.
In the 2023 Financial Statement above, it has a Revenue Net Sales of GUY$513,764; it has a net income/ (loss) and comprehensive income /(loss) for the year equal to GUY$318,652; thereafter, there is a mysterious amount of GUY329,782 that appears from nowhere and is referred to as: net income/ (loss) and comprehensive income /(loss) for the year. These two amounts (GUY$318,652 and GUY$329,782), quite surprisingly, have the same description (see red above); and when these two same amounts are added together (GUY$318,652 plus GUY$329,782), they sum to a total referred to as net income after tax equal to GUY$648,434.With no explanation for the GUY$329,782, which is an addition to the inflow of funds from somewhere, I added it to the inflow revenue stream and did the comparison with the submitted financial statement. In the table below, the results provide the same bottom line of GUY$648,434,000,000.
Given the circumstances above, it is on this basis that I raised the question of a shortfall in Royalty and Profits in 2023, as the GUY$329,782 has not been explained in the financial statement. Incidentally, the MNR made a comment about the difference between the combined revenues being GUY$1.58 trillion and GUY$1.25 trillion. Just for clarification, the difference between the two amounts is related to the unexplained GUY$329,782,000,000 (Table 3). It is unbelievable that MNR missed this.
The final question which must be answered is what is the origin of the GUY$329,782,000,000, if it Is not income earned in 2023? I did some additional research and in an article by Chris Ram (https://www.oggn.org/2024/06/21/stabroeks-junior-partner-cnooc-makes-g355-7-mn-us1-7-billlion-on-share-capital-of-us200000-yes-two-hundred-thousand-dollars/), I observed the following: First, the net income of CNOOC in 2022 was GUY$329,782 (see the table below). Second, this same amount is shown as an inflow into the 2023 financial statement from the 2022 financial statement, yielding the total we have seen before of GUY$648,434, once it is added to GUY$318, 652 (see below).
This transfer of income between years in the income-expense statement is most improper, for net income in one year is never transferred into the financial statement of the next year. Instead, net income is included in the 2022 balance sheet of the same year in which it is earned. Neither Hess nor EMGL has engaged in this kind of presentation, and this must stop. You would also note that in the CNOOC financial report, there is no entry showing the amount of royalty that Guyana should receive. This is also improper. In my letter of July 1, 2024, I suggested that the Government, in consultation with the Institute of Chartered Accountants of Guyana (ICAG), should introduce a standardized format for the presentation of the oil companies’ financial statements. The MNR should be focused on getting this task completed as quickly as possible, as accurate records that conform with the appropriate accounting standards will have a significant impact on the most important non-renewable natural resource sector in Guyana. Get the job done MNR, be professional!
Sincerely,
Dr. C. Kenrick Hunte
Professor and Former Ambassador.
