Preparing for oil: More on Guyana seeking membership of the Extractive Industries Initiative

Today’s column continues the discussion of Guyana’s long declared policy option of seeking membership of the Extractive Industries Transparency Initiative (EITI) as a cornerstone of its approach to governance of the fast approaching time of oil and gas production and export. Last week’s column had started the discussion, but regrettably, due to space, constraints, gaps and omissions remain in that presentation. The main purpose of today’s column is, therefore, to attend to these issues.

Those related to process are addressed in the next section and the 7-Requirements of the EITI Standard further addressed in the last.

EITI membership

According to official statements on this topic, the Guyana Cabinet has identified the Ministry of Natural Resources (MoNR) as the “lead agency” assigned to complete the “4-steps sign up process” leading to Guyana’s membership of the EITI (G –EITI).

This process had begun with government’s announcement back in May 2010, to seek formal membership in the EITI. This action was later followed by a Memorandum of Understanding (MoU) between the government and the EITI International Secretariat to facilitate this process.

The Guyana Multi Stakeholder Group (MSG), which was described in last week’s column, was formed last year. It has four representatives each from government, industry, and civil society. These representatives were independently selected by their respective stakeholder group. A National Secretariat (headed by a National Coordinator) services the MSG group. This function is presently being handled by the MoNR, which provides administrative support to the MSG.

Minister Trotman in his speech to the Parliamentary Sensitization Seminar on the oil and gas sector that was held on December 2, 2016 had definitively indicated Guyana’s target was to become a candidate member of the EITI before the end of last year. In that regard he acknowledged strong technical assistance (training, feasibility and scoping studies, as well as the hiring of consultants) from a broad range of organizations and countries.

These included the Commonwealth, the Carter Center, the Inter-American Development Bank, the World Bank, as well as Canada, the United Kingdom, the USA, and Trinidad and Tobago.

A few observations about the process are pertinent at this stage.

First, although to all intents and purposes most Guyanese view the EITI preferment of the government as seemingly driven by the imminent arrival of the oil and gas extractive sector, the Minister has publicly identified other extractive sectors that may become involved: bauxite, gold, heavy metals, manganese and other explorations.

Second, this pronouncement is further reinforced by another ministerial observation: “It is worthy to note that many of the critical decisions that are to be made such as which extractive sector Guyana will focus upon in the critical areas of reporting will be made in the tripartite MSG”.

Third, for Guyana to become a candidate member of the EITI requires a pledge to meet the seven requirements of the EITI standard. And, within 2.5 years after admission as a candidate member, it must fulfil the seven requirements of the EITI standard, based on an independent assessment, before it becomes a compliant member.

Thereafter its continuance with that status shall be based on successful three-year evaluations. A member however can lose that status and be suspended at any time, if it fails to fulfil its obligations.

There are therefore four statuses within the EITI framework, namely, candidate members (those implementing the EITI standard); compliant members (those fulfilling the standard); suspended members; and other members (those like Guyana which are recognized as presently taking concrete steps to attain candidate membership).

According to the EITI website there are presently 51 countries implementing the EITI, of which 31 are presently compliant; 20 are candidate countries; two are temporarily suspended and four countries are in the ‘other’ category.

The 7 requirements

The seven requirements that together form the core obligations embodied in the EITI Standard are as follows: 1) each country’s MSG is required to be sufficiently empowered to be able to provide effective oversight of the EITI processes; 2) the EITI Standard lays out clearly how to report activity in a timely published manner.

Such activity should be reported along the entire value chain, from resource extraction to turning this extraction into public benefit; 3) all published country reports should provide contextual information on its extractive sector; 4) EITI country reports should also be comprehensive.

By this is meant they should include disclosures on all material elements of revenues received and all material payments to governments; 5) based on international standards, there must be a credible assurance process; for example, independent administration and the use of reliable data; 6) the submitted EITI reports, in addition to being comprehensive, should also be publicly accessible and actively promoted so as to generate informed public debate; 7) finally, the MSG is directed to learn lessons from the unfolding processes and their review of outcomes in order to ensure the ongoing processes are enriched from experiences.

Since its inception, these 7 requirements have driven the goals and aims of the EITI. Experience has shown that these requirements have been interacting and evolving over time.

In truth they have been designed to offer scope for further growth and evolution, without at the same time being so flexible that they become reduced to the trivial. As indicated in the section above meeting the 7 requirements for the EITI Standard determines whether a country is meeting, and importantly, maintaining the status of a compliant member.

At present over 90 companies are committed to the EITI process, along with a similar number of investment institutions.

The latter are reputed to control over US$14 trillion. Furthermore, over 400 non-governmental organizations support the EITI, together with several prominent international agencies.

The latter include the International Monetary Fund, the World Bank, the International Council of Mining and Minerals, Regional Development Banks, including the Inter-American Development Bank (IDB).

Conclusion

Next week’s column will wrap up this discussion on the EITI and provide for readers’ benefit an evaluation of it from the perspective of Guyana’s political economy.