Guyana’s First EITI Report Highlights Both Innovations and Need for Structured Reform
By Sherwin Long – Head, TTEITI Secretariat
By early 2020, ExxonMobil will begin producing oil from its Liza Phase 1 development in Guyana and exactly how revenue from the project will transform the country has garnered much regional and international interest. The changes could be astounding. Guyana’s GDP is expected to more than double by 2025 and the revenue generated from its newfound hydrocarbon resources is expected to improve infrastructure, social services delivery and by extension the standard of living for all citizens. Having publicly available data on the revenue earned from the extractive sectors will be useful will be useful to Guyanese citizens, analysts and potential investors. Importantly, the country has already committed to transparency by not only making its contract with ExxonMobil public but also signing up to the Extractive Industries Transparency Initiative (EITI) even before a drop of oil has started to flow. The EITI aids countries in taking an in depth look at key aspects of their natural resource management including how much tax and social contributions make and where this money ends up on a national and regional level. The initiative also promotes reconciliation of company and Government production, disclosure of beneficial owners of companies and recommendations on improving governance and management of these natural resources.
Guyana recently published its first ever EITI Report for fiscal 2017. The report notes that, in 2017, revenue from gold and other minerals accounted for 84% of the total payments made by extractive companies while oil and gas accounted for 14% and the bauxite 2% (see Table 1). Five companies (four mining and one oil and gas) contributed approximately 55% of the total revenues for 2017. Guyana Gold Fields (AGM) and Esso Exploration and Production Guyana Limited (Exxon Mobil) accounted for 16% and 11% of the country’s extractive revenues while three other mining El Dorado Trading, Mohamed’s Enterprise and Troy Resources Guyana Inc. accounted for 10%, 10% and 8% respectively.
In the next five years, oil and gas revenue will likely comprise a greater share of extractive sector revenue, given the 5.5 million barrels of oil equivalent to reserves in the Stabroek block alone. With this information, from their EITI report, citizens of Guyana will be able to do before and after “Liza production” comparisons on extractive sector revenue.
The GYEITI Report also featured many innovations. The report disclosed the volume and value of fisheries and forestry exports for 2016 and 2017 (see table 2), provided a comprehensive list of thousands of mining licenses and the owners’ licensees and captured the NIS contributions of extractive companies. The report outlined a breakdown of social payments made by companies, in cash or in-kind, giving details on the beneficiary and purpose of the contribution. Your could see how much individual companies contributed to technical training, scholarships or even to fund sports programmes.
Source: GYEITI Report 2017
Source: GYEITI Report 2017
Despite these innovations, this first EITI report, demonstrated the teething challenges associated with the initiative and unearthed some kinks in Guyana’s resource management processes. The EITI really serves as a health check, analyzing whether a country’s revenue collection, data management, audit and assurance systems are functioning optimally. The report’s recommendations pointed to the need for greater monitoring by Guyana’s regulatory agencies. And, some of the recommendations included:
Legislative Reform: Similar to Trinidad and Tobago, Guyana’s confidentiality restrictions in its tax laws do not facilitate the sharing of tax data with third parties. This acts as a barrier to EITI implementation and hampers the EITI Auditor/Administrator’s reconciliation of Government receipts with company payments. In the report, the EITI Auditor/ Administrator recommends that the Government of Guyana amends Section 23 (1) of the Revenue Authority Act (1996) and Section 4 of the Income Tax Act (1929) to allow the information required for EITI reporting to be disclosed. Other legislative reforms for the sector were also promoted. The Petroleum Exploration and Production Bill is carded to replace the 1986 Petroleum Exploration and Production Act and the Petroleum and Exploration Regulations. The Petroleum Environmental Production Pollution Control Regulations and the Petroleum Health and Safety Regulations are also being re-evaluated. The EITI Auditor/Administrator noted that delay on instituting these legislative changes could impact on the country’s investment climate and prompted those in authority to hasten the necessary adjustments.
Creating an Open EITI Database/Mainstreaming: The EITI Standard requirements demand that countries disclose timely, accurate data on revenue, production, beneficial owners and other information. In the report, the EITI Auditor/Administrator noted the need for “implementing and upgrading a cadastral system with adequate details about the shareholders and the beneficial owners of the companies; enhancing the current management information systems of the Government Agencies involved in the GYEITI process and implementing /updating manual of procedures for relevant Government Agencies to put processes in place to ensure timeliness, quality of data and cost effectiveness of the systems.”
Several other reforms were recommended such as the need for all revenue collection agencies to harmonize their databases and develop unique tax payer identification numbers as well as increase the number of companies participating in the EITI. It is important to note that these reforms will not happen overnight. Reform is a process and Guyana will require a marriage of tighter controls and vigilance related to audit and assurance as well as the political will to push through legislative and public sector transformation.
Guyana’s first EITI Report provides useful information for investors, analysts and most importantly citizens on the country’s extractive sector before its oil and gas industry takes off. As the sun rises on Guyana becoming a global energy player, implementing the recommendations of the EITI Report can help ensure that the country’s extractive resources are managed more efficiently and in time benefit all Guyanese citizens.
For more information on the Guyana EITI Report visit https://gyeiti.org/wp-content/uploads/FinalGYEITIReport-FY2017.pdf For more information on the TTEITI visit www.tteiti.org.tt