ChrisRam.net

The Prime Minister’s unlawful invitation for US millions

Introduction

Brigadier (ret’d) Mark Phillips has served in military uniform at the highest level in the country. And now serves at the second highest level in civilian society. Those offices are often identified with personal virtues like valour, honour, courage and integrity, and with qualities like competence and judgment. Not too long ago, I associated him with all of those, and with the conviction that the holder’s words – written or oral – are an undertaking that once made, is a personal debt incurred. There is no room for vacillation, for seeking refuge in delegating blame to others, or for the brazen breach of a national commitment. He has failed and fallen precipitately in my esteem.

Some time ago, as Liquidator designate of the company that published the Stabroek News, I raised with him directly the matter of an outstanding debt of approximately ninety million dollars owed by the Department of Public Information for advertising carried in the Stabroek News over a period of more than a year. He gave his personal assurance that the obligation would be settled after the passage of the Budget. The Budget passed two months ago. The debt remains outstanding. He has since assigned the matter to one of his juniors. Such conduct is indefensible in much lesser beings. It is dishonourable in one as exalted as he is.

I mention this not because it is the subject of this column, but because it bears on issues of credibility and integrity. A man whose personal assurance on a straightforward matter of public debt does not travel the short distance between his office and the Ministry of Finance is a man whose loose language to an unsuspecting investing public warrants close examination. That is the subject of this column.

On Thursday, Kaieteur News carried a report on an advertisement in which the Prime Minister’s Office – the lead ministry for the poorly planned and ineptly executed Gas-to-Energy project – invited “investors, both local and foreign,” to submit expressions of interest in two private companies: the Guyana Ammonia and Urea Plant Inc. (GAUP), estimated at US$300 million, and the Guyana Gas Bottling and Logistics Company Inc. (GGBLC), estimated at US$40 million.

Investors are told they can commit up to US$5 million or US$1 million respectively, and can “assume a government guarantee of 10% annual return.” Apparently expanding the statutory function of the National Procurement and Tender Administration Board, the invitation directs prospective investors to forward their expressions of interest to the chair of that body.

The advertisement is, in my view, unlawful on its face. It is a public invitation of investment capital dressed up as a procurement notice, inviting members of the public to commit money on the basis of a government promise on a venture that is like a financial plague on the country. PM Phillips is aware that the PPP/C enacted the Securities Industry Act, (SIA) precisely to protect the public by ensuring that adequate information is provided to allow informed decision-making and risk-taking. In failing to meet those standards, the invitation is reckless, dangerous and unlawful. Before anything further is done under it, the Prime Minister would be well advised to take legal advice from independent counsel conversant with both the Companies Act and the SIA.

A cynic might wonder whether, by its emphasis on “private” company, the PM’s Office believes that the identity of the investors will also be private. They would be wrong. The Financial Intelligence Unit might wish to step in and advise the NPTAB that there is a test in money-laundering law called “source of funds.” Another reason feeding cynicism is the recent removal of property tax on individuals. These “private” investment offerings might be interpreted as opportunities to hide assets right here in Guyana – and in a government company with considerable experience in that area.

And here is why the PM’s Office needs legal advice. Unlike Humpty Dumpty, words in real life have a real meaning, not just what the OPM “chooses it to mean – neither more nor less.” Section 2 of the Companies Act defines a public company as one whose issued shares or debentures are or were part of a distribution to the public within the meaning of section 531 or are intended for such distribution. Section 3 of the Securities Industry Act adds a second limb: a company is also a public company if it is “the issuer of a security that is beneficially owned by more than fifty persons.” Both statutes treat the public character of a company as a consequence of how its securities are offered and held, not a label the government attaches to it.

Two features of the invitation make the self-description difficult to sustain. At a US$5 million cap on a US$300 million plant, sixty investors are required if each takes the maximum, and in practice many more. The moment beneficial ownership crosses fifty, the SIA treats the company as public, with the expansive duties that follow. Second, the offer is made publicly and directed to “local and foreign” investors, including the diaspora. That falls squarely within the SIA’s definition of “offer to the public”. The advertisement seeks shelter behind the statements that “all information provided is only indicative” and that the document is “only a preliminary Expression of Interest.” The Act offers no such escape hatch.

Conclusion

Honest and sincere prospective investors should be careful about this “invitation” and about what they may be getting into. A “private company” in which the government exercises control is still a government company. A “private” company whose securities are offered to the public is by statutory effect a public company. No ifs and buts.

Until the law is complied with – including the full set of information, documents and processes – by the two companies, the invitation should be treated as what it is: a public offer which the law does not permit. It ought not to be that difficult for the PM to disclose the composition and election of the companies’ boards, the terms of the sovereign guarantee, the appointment of a Trustee to protect the interest of the investors, and the ranking of the investors’ claims.

The PM will do himself some good to seek advice on promoter’s liability and the provision of the laws which attach personal criminal liability to those who authorise, permit or acquiesce in such conduct, subject only to very narrow defences. Those are matters for next week’s column.

(This column which appears on chrisram.net is reproduced with the kind courtesy of the author).

Column 180 – Of Windfalls, Unwelcome Interventions and Waning Sovereignty

With President Trump’s Israeli-led War on Iran triggering a dramatic rise in oil price, there have been calls for a windfall tax on the American led consortium that owns the hugely profitable Stabroek Block. The formerly silent US ambassador to Guyana Nicole Theriot, would have none of it. She warned – delicately, unmistakably and improperly – that any move to revisit the 2016 Petroleum Agreement could send the wrong signal to investors.

Her intervention comes at a time when public discussion in Guyana is rightly turning to whether the existing fiscal terms still deliver a fair outcome in the face of high prices and sustained profitability. But that intervention is neither isolated nor accidental. It must be seen against a broader pattern in which Guyana President Irfaan Ali has, with increasing visibility, aligned Guyana more closely with the United States, in a manner that risks placing the country at some distance from its traditional CARICOM partners.  

Encouraged, perhaps, by figures such as the outspoken Marco Rubio, the Ali Administration has recalibrated aspects of its regional relationships, including a noticeable cooling of ties with Cuba, while simultaneously embracing high-profile engagements with United States political figures, among them the discredited Kristi Noem and, most strikingly, President Donald Trump. These are not merely ceremonial encounters: they signal a deliberate geopolitical posture, the implications of which are now beginning to surface.

The difficulty, however, lies not in engagement with powerful hemispheric partners – such exchanges are part and parcel of diplomacy – and are helpful at a time when concerns about territorial integrity persist. But there is a growing concern among Guyanese that these initiatives are being pursued without sufficient consultation, discussion, or reporting, thereby limiting public scrutiny of actions that carry significant national implications. It is understandable for Guyanese to believe that personal interest is being elevated above established processes, and that private relationships risk being seen as taking precedence over considerations of national sovereignty and the wider public interest.

At this time when Guyana is in a position to benefit from the windfall in oil prices – and even as we mourn the deaths and destruction in Gaza and Iran – we need to seize every opportunity to maximise our earnings from a finite resource which will be gone before this generation expires.

We must therefore reject any interference by the US Ambassador in what is a commercial, sovereign issue. We must reject too, her suggestion that Guyana is breaching the 2016 Agreement when all we are doing is calling for justice and fairness – like every other country ought to do. And that we are putting Guyana first, just like her President does for America.  

There is a myth peddled by Exxon that the 2016 Agreement provides for equal benefits. That narrative fails to acknowledge the economic reality when one looks behind the numbers. It totally disregards the royalty structure, the cost recovery ceiling, the payment of corporation tax by the Government on behalf of the companies, or the absence of withholding tax on distributions.

Applying the Agreement, when the 75% cost ceiling is utilised, the Government’s share of every hundred barrels is approximately 12%, rising only to about 24% when costs fall to 40%. Over the same range, the companies’ profit-related benefit increases from about 20% to 41%, consistently and significantly exceeding the State’s share. This outcome is driven not by risk, but by a fiscal structure under which Guyana pays the companies’ taxes and collects no withholding tax on the profits they take abroad.

Meanwhile, the wider economy bears the substantial external costs of a dominant extractive sub-sector.

In a contract in which Exxon applied maximum duress – and Granger and Trotman were clearly not up to the task at hand – this outcome cannot be justified. Exploration risk which was minimal on the signing of the Agreement has largely disappeared, reserves have been proven well beyond initial expectations, and production has entered a phase of sustained expansion.

Even under less favourable conditions, many resource-producing countries revisit their fiscal regimes. Not as a breach of faith, as the Ambassador would have Guyanese believe, or worse, hostility towards investors, but as a recognition that long-term agreements must retain a measure of flexibility if they are to remain justifiable economically and legitimate politically.

What Guyanese are seeking therefore are neither radical nor unprecedented. They range from requiring the oil companies to bear their own corporation tax liabilities, be willing to pay withholding tax on profits, and introducing a modest mechanism that allows the State to participate more fully in periods of exceptionally high prices. No unilateral action is called for, and importantly, any or all of these can be pursued within the existing contractual framework without undermining the viability of the Block, or the attractiveness of the investment climate.

Since there is no intention of unilaterally amending the Agreement – which Exxon would in any case successfully challenge – the Ambassador’s comments are, at best, uninformed and must be rejected outright, and at the other end nothing less than an unwelcome interference in our country’s sovereign affairs. As our guest, the Ambassador must respect our country’s permanent sovereignty over its petroleum resources. A State that refuses to revisit arrangements that no longer reflect current realities convey weakness, while one that engages constructively and within the bounds of its agreements to secure a more equitable outcome, signals both maturity and confidence.

In the final analysis, the issue is not whether Guyana should send a signal to investors, but the kind of signal it should send. And that is not for the USA to decide or dictate.

This series, originally carried in the Stabroek News, will continue on this platform while maintaining the numerical sequence of the columns

Road to First Oil

Every man, woman and child must become Oil-minded

The report of a quiet settlement – some US$82 million paid following arbitration in the Gas-to-Energy Project – ought to give the country pause. Not because disputes arise in projects of this scale – they do – but because of how early, how quietly, and how expensively this one has done so. It is a thought that comes uncomfortably to mind, for what we are witnessing is not merely a problem of execution but a problem of design.

Projects of this magnitude do not descend into arbitration at this stage unless something fundamental has already gone wrong – not only in construction, but in conception, procurement and planning. The Wales development now presents a pattern rather than an isolated difficulty. The soil problems – predictable, avoidable, and elementary – have required extensive stabilisation work at significant additional cost. That is not contingency; it is a failure of due diligence. The arbitration, settled at approximately US$82 million after an even larger initial claim, is not misfortune but a failure of contract structuring and risk allocation. And surrounding all of this is a troubling silence in which the country was not told, the cost was not disclosed, and the implications have not been explained.

Layered onto this is the matter of time – promised, revised, and repeatedly missed. The project was first presented with timelines that spoke to completion within a compressed horizon, at one stage as early as 2024. That date passed. It was then shifted to 2025. That too slipped. We were then told to look to 2026, and now even that horizon appears uncertain, with full completion drifting into 2027. Each revision has been presented as an adjustment; taken together, they tell a different story. Deadlines are not merely dates on a calendar – they are statements of planning, competence and control. When they are missed once, questions arise. When they are missed repeatedly, conclusions begin to form.

The difficulty, however, runs deeper than delay. This project is inseparably tied to the petroleum operations offshore under the 2016 Production Sharing Agreement. The gas originates there, its economics are shaped there, and its accounting must ultimately return there. Yet the project is treated as though it exists outside that framework – outside its transparency, its discipline, and its scrutiny. If any part of this expenditure is treated as recoverable cost, then the country is paying in ways not immediately visible: not only through direct budgetary outlays, but through reduced oil revenues. It is paying in cash, and in silence.

Even on the most conservative view, the visible costs alone are troubling. A project once presented in the hundreds of millions now sits comfortably in the billions, and each delay adds not only time but cost, while each dispute adds not only cost but uncertainty. Each missed deadline extends the period during which households and businesses continue to pay existing tariffs, pushing further away the central promise upon which the project was sold: cheaper electricity. In the meantime, there is a compounding burden in which capital is committed but not productive, inefficiencies accumulate, and assumptions are overtaken by reality. The project does not wait for reality; reality moves on without the project.

There are also costs that do not appear in any estimate, but which are nonetheless real. Land has been compulsorily acquired, and citizens have been required to surrender property for what is said to be a national purpose. Yet questions remain as to whether compensation reflects true value. Where fairness is uncertain, legitimacy is weakened, and where legitimacy is weakened, dissatisfaction and suspicion inevitably follow.

And still, the central question remains unanswered: who is responsible? There is no clear single point of accountability, no consolidated reporting, and no regular, transparent accounting of cost, progress, and risk. Responsibility appears diffused, accountability remains elusive, and transparency is, at best, selective. In such an environment, even success becomes difficult to measure and failure difficult to assign.

We have seen this movie before, not as a trailer – or as a shorts as it was called in my days – but as a full saga. The Skeldon Sugar Modernisation Project followed a similar path of early promise, escalating cost, shifting timelines, prolonged silence, and then disaster. The difference now is one of scale. Then, the sums seemed large; now, they seem modest. Yet the underlying lesson appears unchanged, and the consequences potentially far greater.

What is perhaps most concerning is that even though this project remains incomplete – its cost uncertain and its performance untested – there is already movement toward expansion. Another gas-to-energy project, additional capacity, and replication without validation are being contemplated. This is not sequencing but escalation, and it risks compounding uncertainty rather than resolving it.

We are told that this is a “world-class” project. It may yet become one. But as matters now stand, it is something else: not a white elephant, for it will be used, but a costly lesson in weak planning, poor sequencing, and avoidable error. What began as a promise of progress has become a matter of concern – about cost, about competence, and about governance. And now, with the disclosure of the arbitration settlement and the accumulation of missed deadlines, one further conclusion presses itself forward: this is no longer merely a project under strain; it is a project riddled with uncertainties, missed deadlines, mismanagement, ballooning cost and bleeding billions.