The Guyana Revenue Authority says it is examining the audit report for US$460M of ‘pre-contract costs.’ Irrespective of any audit by IHS Markit, or anybody else, the Guyanese people are not liable for any ‘pre-contract costs’ unless three conditions are met.
One: Clear legal authority. Where was Raphael Trotman’s legal authority to agree to ‘pre-contract costs’ in the 2016 Petroleum Agreement with Esso Exploration and Production Guyana Ltd., Hess Guyana Exploration Ltd., and CNOOC Nexen Petroleum Guyana Ltd.?
Under Annex C Section 3.1 (k) ‘pre-contract costs’ consist of US$460,237,918 plus additional costs of about another US$500M which amount to over US$960M (over G$200 billion). Compare this figure with the 2016 national budget of G$231 billion which Mr Jordan described in his budget speech as “bigger than any we have ever had before” and which required taxes, duties, royalties etc. to be extracted from the Guyanese working people. Compare this also with ExxonMobil’s profits for 2016 which were about US$7.8 billion (G$1,638 billion).
Mr Trotman’s attempted giveaway of over G$200 billion is so irrational, unreasonable, arbitrary and disproportionate, so completely repugnant to decency and common sense, so burdensome on the Guyanese people, that it cannot be implicitly authorised by the provisions of the Petroleum Exploration and Production Act Cap 65:05 but would have to be specifically and unambiguously authorised by an act of Parliament that did not conflict with the Constitution.
The Guyana Revenue Authority, as a statutory body, simply cannot accept any claim for recovery of pre-contract costs without solid legal authority. So, Mr Trotman produce your legal authority for the Guyanese people to see.
Two: the costs must in fact amount to ‘pre-contract costs’. There must be clear evidence that (i) the costs being claimed as ‘pre-contract costs’ were actually required as expenditure under the Petroleum Agreement 1997 and (ii) the money was actually and exclusively spent on the items claimed. There must be no expenditure claims for the years of force majeure when it was claimed that work had to be halted.
In 2017, Jan Mangal who was advising David Granger, said that “People in Guyana need to trust the [oil] industry because they don’t know the industry.” (https://oilnow.gy/featured/government-must-facilitate-more-informed-views-on-oil-presidential-advisor/) Let us not insult the intelligence of the Guyanese people. We know that in 2017 ExxonMobil was fined US$74 billion by Chad for not paying its taxes. We are not taking anything on trust.
With the exception of a tiny elite, Guyanese taxpayers are not well off. GDP per capita in 2016 was roughly G$952,000 (US$4,531.) We are not so rich or so stupid as to throw away billions of dollars. The expenditure of every dollar claimed in ‘pre-contract costs’ must be verified or it must not be approved.
Three: The verification must be done by an impartial and independent professional body that is seen to be impartial and independent. In a matter as controversial and economically damaging as these ‘pre-contract costs’, IHS Markit must make full disclosure confirming whether and to what extent they have previously had as their clients, ExxonMobil, CNOOC, Nexen or Hess or any of their subsidiaries or affiliates. Then we can decide whether we believe them or not.
In the meantime not a single Guyana dollar should be approved.
Yours faithfully,
Melinda Janki