A few years ago, oil companies would bombard the Guyanese people with “frontier country” to justify an embarrassing Stabroek Block contract that is currently paying us a paltry 14.5% or less of total oil revenues. The oil companies seem to have retreated from marketing us the “frontier country” tune after pushback from those in the media and civil society. But the Government of Guyana is now pushing the sanctity of contract as a reason why the Stabroek Block Contract cannot be negotiated for fairer terms.
Chris Ram recently published an enlightening article titled, “Natural Resource Fund overstated by $274,765M, should be addressed as a matter of urgency” that was in the December 29th, 2023 edition of the Stabroek News. Ram, using financial reports from the subsidiaries of the oil companies in conjunction with the Natural Resource Fund (NRF) statements, showed the NRF was overstated by US$1.3 billion. This is an astounding 26% of all the money that has flowed into the NRF up to end of September 2023.
One can cross-correlate Ram’s work with other information to check his figures. Example, on the HESS USA website, this web page https://www.hess.com/sustainability/how-we-operate/tax-practices indicates that in 2022 the HESS Total Current & Deferred Tax Expense for Guyana was US$513 million. That figure corresponds to the figure in Ram’s table titled, “Summary of Contractor’s Income Statement (Exxon, Hess, CNOOC)”. Ram points out in his article that Guyana did not collect any taxes from the oil companies. However, it is evident that the Government of Guyana (GoG) issued HESS a tax receipt given HESS is publicizing this on its US website for all to inspect. The GoG issuing a 2022 tax receipt to HESS when there is no accounting for how the money was paid, seems to be a case of enabling international foreign tax credit fraud.
What is also intriguing is the GoG parroting sanctity of contract. Ram states in his article, “…there is a clear disconnect between the [NRF] Act and the Petroleum Agreement in that section 16 of the Act dealing with withdrawals does not include the taxes paid on behalf of the oil companies.” Hence, via the NRF fund, the government has been breaking sanctity of contract specifically with respect to 15 (4) in Stabroek Block PSA and 16 (2) in the NRF Act. It was this government that instituted this new NRF act in December of 2021.
In Sunday’s Stabroek News in an article titled, “Nandlall disputes claim that NRF overstated by billions”, the article states, “…2016 Production Sharing Agreement, as that Agreement imposes upon the Minister, a number of obligations in respect of the payment of taxes to the GRA on petroleum production, the Attorney General argued that those provisions in the Agreement have obviously been overtaken by the Natural Resource Fund Act.” This is astounding that the government which has been claiming sanctity of 2016 Stabroek Block contract now claims the 2021 NRF Act should take precedence over that contract. The Attorney General further states, “It is a very rudimentary principle of law that if a contract conflicts with a Statute, the Statute shall prevail.”
Even without changing the Stabroek Block contract as Chris Ram has pointed out in a recent interview, see here https://www.kaieteurnewsonline.com/2023/12/25/ram-exposes-jagdeos-misleading-claims-on-ring-fencing-on-oil-projects/, ring-fencing can be applied to the oil projects under the Stabroek Block. This is as per regulation 18 of the Regulations made under the Petroleum Exploration and Production Act of 1986. This would result in additional billions of US dollars flowing to Guyana which can be used to help the 40% plus living on less than US$5.50 a day.
The current government has pointed to the opposition signing the Stabroek Contract implying it is handcuffed in obtaining a better deal. However, the opposition has approved 2 Stabroek Block projects, i.e. Liza 1 & Liza 2, while the current government has approved 3 projects: Payara, Yellowtail, and Uaru. Hence, the current government has allowed 3 opportunities to slip by where they could have used ringfencing to secure more oil money for Guyana. This is the same government in this video clip, https://www.oggn.org/2021/09/29/irfaan-ali-said-that-all-oil-contracts-are-on-the-table-for-review-and-renegotiation/ , that said all oil contracts are on the table for review and renegotiation when it was in opposition.
Instead of the Government of Guyana parroting the highly questionable sanctity of contract, it should spend its efforts working for the people of Guyana by using our laws to secure a fair oil deal or at least better terms for the new oil projects in the Stabroek Block. At the moment, the government seems content to serve their new oil masters forgetting they were elected by the people of Guyana to serve our interests.
Sincerely,
Darshanand Khusial
Charles Sugrim
On behalf of OGGN
Article Originally Published At: https://www.kaieteurnewsonline.com/2024/01/01/the-nrf-tax-violation-calls-into-question-sanctity-of-the-stabroek-block-contract/
