Ministry defends decisions on Liza-1 well
-following criticisms by Mangal
The Ministry of Natural Resources (MNR) on Friday defended its decisionmaking on ExxonMobil’s Liza Phase 1 project saying that best practices were observed and no illegality or nefarious objective guided the process.
“The Ministry and GGMC (Guyana Geology and Mines Commission) sought to ensure that in achieving the objective of ‘first oil’ by 2020, overall and international best practices were observed. Though it may be difficult for some to see presently, the nation will, in the near future, realise, and come to know, that no funds were misappropriated and that no illegality or nefarious objective guided our decisionmaking,” the Ministry said in a statement. ExxonMobil’s Liza Phase 1 project is expected to see Guyana becoming a commercial oil producer in 2020.
In responding to comments on the Development Plan for Liza Phase 1 which, according to the statement, “appear to raise inadvertently or otherwise, the spectre of some sinister motive or corruption in the decision making process,” the MNR defended the process. The statement did not identify the specific comments but last Thursday, Stabroek News reported former Government Adviser on Petroleum Dr Jan Mangal as saying that government should put all approvals for ExxonMobil’s Liza Phase-2 on hold until a complete review of the Liza Phase 1 project cost is done.
Mangal had chided the MNR for its failure to review the US$4.4 billion capital cost cited by ExxonMobil for the Liza Phase 1 project and said that the review should have been performed prior to the approval of the production licence in mid2017. He had said that it was not unreasonable that the capital cost for the Liza Phase-1 project could be reduced by 20% and suggested that by not reviewing the cost, then the Ministry effectively gave ExxonMobil US$880 million of Guyana’s money - which is more than four times the cost of the Skeldon Sugar Modernisation Programme - for no reason.
“One might ask why we need to review these costs. Why not trust the foreign oil companies to give us our share and not to inflate their costs (so as to increase their profits at our expense)? Look at the countries that get exploited by foreign oil companies and their own corrupt politicians. Those countries tend not to verify and check, often because their politicians are on the take, so they do not care about the people. Then look at the countries where the people benefit and the environment is not degraded by oil: these countries tend to review and verify everything,” Mangal had said.
Following calls to do so, the Guyana Revenue Authority (GRA) has said that it will audit not only the pre-contract US$460M up to the end of 2015 but the 2016 and 2017 cost recovery charges that are believed to be over US$500M. Mangal, however, believes that the GRA is not capable of undertaking such a task as the audit required calls for specialist interpretations not familiar to Guyana because of its frontier oil and gas status and thus lack of expertise.
In its statement, the Ministry recalled that it was given the responsibility of ensuring ‘first oil’ production by 2020 and that was the preeminent objective over the past three years. It said that it worked with other Ministries that had specific mandates to ensure that the timeline was kept. The officers at the Ministry did their best within their capabilities, capacities and available resources, the statement declared.
According to the statement, at every step of the way, the MNR relied on guidance and advice from the GGMC and the external contractors retained by that entity, to guide on each such step. Additionally, the Ministry sought and obtained Cabinet’s unanimous approval for each decision made.
“The Ministry of Natural Resources is not legally imbued with regulatory powers and relies on the semi-autonomous agencies within its remit to provide advice and recommendations when decisions such as the one now being challenged are to be made. In the instance of the Development Plan, the GGMC indicated that it lacked the capacities to review the Development Plan for Liza Phase 1, and as such recommended, and Cabinet approved, the retention of an international firm, which eventually advised GGMC that the Development Plan was well within the international standards for a project of this nature. Consequently, based on the recommendation of GGMC, the Development Plan was approved,” the statement said.
“We are pleased to have played a part in having Guyana and its citizens realise their long promised and awaited attainment of their destiny, and wish the Department of Energy God’s speed and guidance in the process going forward,” it added.