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Kaieteur News
Saturday February 20, 2021
Kaieteur News Printed and Published by National Media & Publishing Company Ltd. 24 Saffon Street, Charlestown, Georgetown, Guyana. Publisher: GLENN LALL-TEL: 624-6456 Editor: Sharmain Grainger Tel: 225-8465, 225-8491. Fax: 225-8473, 226-8210
EDITORIAL
Commercial Registry and beneficial owners It is perplexing that in this day and age, when transparency is supposedly the order of how things should be, we have Guyana’s Commercial Registry finding it necessary to draw a hard public line on disclosure of beneficial ownership of companies registered with it. And it is suspicious when there is a failure to disclose beneficial ownership of companies registered with anything to do with this country’s oil. In fact, we at this publication would go so far as to state that it is suspicious, in the extreme, when every effort is made to conceal beneficial ownership in companies having to do with Guyana’s oil. It is highly unacceptable that this is what has happened under the previous PPP government, where stringent steps were taken to hide and mislead the nation’s population on what was taking place with our oil. Specifically, in the instances of the awards of the Canje and Kaieteur oil blocks, it was the equivalent of pulling teeth, pulling fingernails (one by one), and pulling out hair one root at a time to get any answers, any sliver of information on who were the beneficial owners of those rich oil blocks; blocks that were estimated to have billions of barrels of oil equivalent resources. And despite doing all of that pulling without any anaesthetic, there were still no details forthcoming from any source, as to the identity of the beneficial owners of those two oil blocks. Why should this be with something of such value (or any value) that belongs to the people? How could this be with rich assets that are the property of all of the people of this country? Since those two oil blocks were the property of the people, and not the PPP leadership to do with as was pleasing to them, or as appealing to their scheming minds, then there are so many other sharp questions that could be asked. None of those questions or the related thinking behind them is favourable to the integrity, principles, and honour of Guyanese political leadership, be it the PPP or coalition leadership, but especially, that of the former. The worst and lowest misgivings take firm hold and would not let go, given that there is only silence and dodging on what went on and why it had to be so in the first place. As many Guyanese ought to know by now, it was the unceasing and tireless efforts of this paper that led to the unearthing of names like Dookie and Chuck-A-Sang and LowA-Chee. Those are all Guyanese, who served as front men and middlemen doing the apparently questionable biddings of senior PPP political honchos. The latter were and are still bent on overseeing the country’s oil business in a secretive and sleazy way. In addition to the collaborating Guyanese, there were others from Canada and Israel and later, going down the line, as far away as Australia. The slick political players made sure their people took a lot of care in confusing whatever tracks and personnel may come to light at a later time. As we consider all of this, and we are sure that the local Commercial Registry was not unconscious of our almost daily disclosures over the beneficial owners of those oil blocks, it is with considerable delight that we welcome the insistence and rule, this new demand, that beneficial ownership must be disclosed for companies seeking registration. This is nonnegotiable and has to be a standard feature of conducting business in this country. There is nothing burdensome or special about such an arrangement (a demand, if such must be the case), and this is not just for oil, but for all companies. And the more details about those beneficial owners that can be furnished the better. The Commercial Registry is calling for the beneficial ownership disclosure for those holding 25 percent or more of the shares of the underlying company. Since there are a bunch of crafty characters around, it would not surprise us if suddenly, most (or all) of the owners of a company up for registration are under the 25 percent disclosure threshold. Though there is nothing wrong with that, given how we have gone about business in this country, that less than 25 percent floor could conceal a world of worms that eats away at the fabric of honest commercial endeavours in this society. And at the top of the list is oil.
Tendering, including for gas, must be open and transparent DEAR EDITOR, In theory, government contracts are given out based on an open, transparent tendering process – the most effective tender supposedly gets the job. Is it really so? Is the entire process of submitting a tender a sham? For the four studies for gas to shore, is there any tendering? Or is government just selecting any four entities to do the gas onshore studies? Is it ethical for Ministers to direct contracts to favour bidders? Should government engage in no bidding contracting? There were allegations of manipulation of tenders during the last PPP administrations that ended in 2011 and 2015 with loss of political support. In spite of economic progress, the PPP was removed from office. Did the PPP learn anything from those allegations and the election outcomes? We are six months into the new administration. Is a repeat in the making? It is becoming common practice for Ministers to override their departmental tender boards within their respective Ministries and award contracts as per the
Minister’s directives. It was so under the previous regime except for a few Ministers against whom there were no allegations of wrongdoing or contract interference. But this government promised to do business differently from its predecessor. Instead, there are more abusive practices that are costing taxpayers billions of dollars. Are all contracts advertised or tendered? How about the much talked about gas project for Wales? Are some contracts sole sourced with preferred bidders? It was recently revealed in a report in a paper that two companies got 85 percent of the contracts to supply the Health Ministry with drugs. Is that fair? There is much hype over the Eccles to Diamond road recently done. Why was it not tendered? Which company did the road? Who owns the company? Is there an incestuous relationship between contractor and someone in the government? Is the contractor a front for anyone in the government? It is now necessary for the Auditor General (AG) to pay close attention to every tender so as to prevent
manipulation of the process. Copies of tenders should be submitted to the AG’s Chamber. And opening of tenders should be done in the presence of AG staff and made public before evaluation is done so that costs are not changed in favour of a contractor or to add something for rewarding of the contract. This open tendering process would restrict the kind of ministerial abuse that is emerging in which ministers direct which company gets a contract. Are contractors being called in to pay a fee and/or told of a deal to get the contract? Is the contract price re-negotiated to include the deal? On deals, are family members of a Minister providing a service through a recently established company that is expediting approval of construction and facilitating contracts? There are suggestions that this is the case and that this is a Ministry that has one of the largest budgets. Is it right for family members of Ministers to engage in this kind of business activity and is it fair to squeeze contractors for a
fee in order to land a contract? Editor, putting in a tendering process cost in excess of $200K — buying the tender package and going through the expenses of preparing the documents like hiring engineers to complete the required paper work, packaging of the materials, and the time spent — only to find out the entire process is a sham. A small contractor finds the process prohibitive and cumbersome, and feels pain when a contract has been manipulated to favour a particular contractor who pays to play. While a few former Ministers did not interfere with the tender process, and they are applauded for their honesty, it appears that the opposite now obtains in several Ministries where an honest contractor finds it almost impossible to get work. Ministers should not have the power to determine who gets a tender. The process should be open and transparent perhaps involving the Auditor General to witness the tender process and audit the work. Yours truly, Nigel P. Blake
What is Local Content and who should benefit from it? DEAR EDITOR, I applaud the government for consulting with the public on arriving at a policy on local content requirements (LCR) for the oil and gas industry. Local Content Policy refers to the legal requirement of foreign investors using domestic goods and resources or services. We have limitations in both. When the APNU led regime was negotiating with Exxon in 2016/17 on a new oil production agreement for field development, a few of us, economists and budding oil enthusiasts, met in New York as well as online discussing royalty, profit sharing, and local content and offered recommendations. We also organized seminars and hosted oil specialists in several public forums in New York and zoom webinars. As expected, our recommendations were all ignored and Guyana signed a lopsided agreement. The APNU regime signed an oil agreement that was well below international norms. Since then, we have championed efforts to renegotiate the unjust contract without success. The current President, Vice President, Minister of
Energy and other spokespersons for this administration were quizzed by Mr. Glenn Lall and KN on renegotiation of the oil agreement. The government says it will not violate the sanctity of a contract but that it will press for greater local content in oil companies’ exploration and production. Exxon claims it has been spending billions on local content. Since there has not been any audit of Exxon’s expenditures or purchases or hiring, Exxon’s figures can’t be verified. It can’t be determined what percentage of Exxon’s expenses or personnel are actually ‘local’ content. A genuine audit may find just a small percentage of Exxon’s Guyana cost operations is local content. The present administration has displayed seriousness about local content. Colleagues who met regularly over the last four years to discuss local content and other oil and gas related issues complain that they were not invited for participation in the recent panel discussion. All countries, including UK, Norway, etc., have a local content requirement in extraction of resources or
foreign investment. There is a percentage of local resources in foreign investment that varies as per negotiation. Generally, World Bank and IMF recommends not less than 20 percent but can be up to 50 percent. Guyana does not have much technical skills or resources or capital equipment for oil or gas production. So its local content resources may be very infinitesimal. What qualifies (or not) as local content and how can it be enhanced? Local content is the value of local input that a project uses to help boost the national economy. It is not just the utilization of local food but other resources as well including development (training) of local skills and technology transfer. Local content is not the equivalent of hiring Guyanese for cleaning of the oil platform and rooms, cooking for platform staff, washing underwear and bed sheets, supplying “bhajie” and water melons, and non-technical activities. Local content is building a workforce that is skilled to meet the requirements of the energy industry. It is also hiring Guyanese in management.
Those were some of our recommendations that were ignored by those who negotiated with Exxon. It is expected that more Guyanese will be increasingly employed in the oil and gas sector and taking over the daily activities including technical aspects of the industry. Since Guyana lacks local manufacturing and oil specialists, it is expected that Exxon will provide training to Guyanese to enable them to take over operations of production. Guyanese must be provided the technical aspects of production not just in cleaning platforms or lifting pipes or transporting materials from shore base to platform. Where possible, Guyanese can be trained for the oil and gas industry by a local (not expatriate) contractor not just in Calgary or Texas. Local content is also defined in terms of the ownership of the enterprise involved in production and training of Guyanese. Having a foreigner or an expatriate establishing operations in Guyana and virtually owning the newly found company that offer basic training to a (Continued on page 22)