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Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 157

Introduction

Amid concerns about unresolved audit issues, mysterious tax certificates and controversial oil spill legislation, Hess Exploration Limited, a branch of a Hess subsidiary incorporated in the Cayman Islands, is the first of the Stabroek Block partners to lodge audited financial statements. The Cayman Islands company is a wholly owned subsidiary of Hess Corporation, incorporated in Delaware, USA, which is one of the most permissive jurisdictions in the United States.

Hess filed two sets of financial statements: Hess Guyana Exploration Limited, which operates the Stabroek Block as a subsidiary, and Hess Guyana (Block B) Exploration Limited, a subsidiary of a Bermuda-based company that holds a 20% interest in the Kaieteur Block. The separate external companies arrangement probably allows the two separate branches with similar names under the Guyana Companies Act. Another point of interest is that the financial statements of the Stabroek Block branch are stated in US Dollars, while those of the Kaieteur Block are stated in Guyana Dollars. Notwithstanding, both have the same Guyana auditors. The separate financial statements for this Block note that it was relinquished in 2023.  There is an additional anomaly that the financial statements for the Stabroek Block are expressed in United States Dollars, while those of the Canje Block are stated in Guyanese dollars.

The rest of this column examines the financial statements of Hess Guyana’s 30% participating interest in the Stabroek Block.  While the audited statements are stated in US$, we have converted these to Guyana Dollars.  All Tables sourced from the Branch’s financial statements.

Except for the tax borne by the Government being accounted for as non-customer revenue, revenue is derived from the sale of 40 million barrels of crude oil in 2024 (up from 19 million in 2023) to a marketing subsidiary of Hess Corporation. Revenue rose by 58%, from GY$738.03 billion in 2023 to GY$1,165.51 billion in 2024. Cost of sales as a percentage of revenue fell from 11% to 8%, while Depreciation, Depletion and Amortisation accounted for 15% in 2024, up slightly from 14% in 2023. Gross margin reached 77%, up from 75%. General and Administrative expenses remained steady at 1% of revenue. Due to rounding, Operating Income was GY$880.5 billion before financing costs of GY$3.16 billion, leaving Net Income before tax of GY$877.34 billion—an increase of GY$351.10 billion or 67% over 2023.

Here comes the quirk. The Statement shows a tax expense of exactly 25% of pre-tax income, explained by Hess in a manner both confounding and misleading. Article 15.4 of the 2016 Stabroek Agreement clearly states that the Government of Guyana, not the contractor, pays the income tax liability using the State’s share of profit oil. Yet Hess describes this as a portion of “gross production,” separate from cost oil and profit oil, being used to “satisfy” the tax. This is not only misleading, it is false. There is no third allocation. The tax is paid from the Government’s share, exactly as agreed.

This dishonest accounting narrative is not the doing of local auditors or management. It originates in documents filed with the U.S. Securities and Exchange Commission and passed down to Guyana. That makes it not just a local embarrassment but an international one.

The Balance Sheet

The Balance Sheet exhibited substantial asset growth, with total assets increasing by 35% to reach GY$1,791,314 Mn at year-end 2024, an increase of GY$465 billion from the prior year. Significant additions included the purchases of Liza Destiny and Prosperity FPSOs, as well as increases in material and supplies of over US$100 million in current inventory.  Receivables of $61,837 Mn were an increase of 17% over the previous year and represent amounts due from the sale of crude oil, all of which is sold to a related party.

Staggering returns

A key measure of financial performance is the return on capital, measured by income divided by average capital employed. Given that the profit before and after tax is the same (GY$ 877.34 billion), and the average of the 2023 and 2024 year-end equity figures is GY$1,280.714 million, the return on capital employed to Hess stands at a staggering 68.5%.

This means the company generated nearly 69 cents in operating profit for every dollar of equity capital deployed – an extraordinary return by global oil industry standards. Such a result confirms that HESS Guyana’s operations in the Stabroek Block are not only profitable, but exceptionally so, raising important questions about how much value is being retained by Guyana itself in this contractual relationship.

And this is the result. The Branch distributed to its head office – we are not sure which one – US$1,454,509,084! All for a 30% stake, and the extreme generosity of our politicians who accuse the nation of being “stupid” and “unable to understand.”  

Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 156 – 17 May. 2025

Introduction

As feared, the Government ignored calls to refer the Oil Pollution Prevention, Preparedness, Response, and Responsibility Bill to a Select Committee and advanced it to a second reading. Listening to the exchange in the National Assembly, it was entertaining to see how members accused each other across the House of not having read the Bill. Standing among these was the Minister of Natural Resources, who spent most of his time discussing the IMF, the OAS, EITI, the World Bank, and the NRI.

Yesterday’s column spoke of the maze of institutions created by this Bill. At the top of the pile is the Civil Defence Commission, currently a loose body that, in a single clause, is transformed into a body corporate, a legal entity headed by a Governing Board. There is nothing to suggest how this body will relate to the Environmental Protection Agency and to the Ministry of Natural Resources.

One thing is sure: any idea of a Petroleum Commission is now dead, as dead as Review and Renegotiate. Another certainty is that the CDC has no capacity in personnel and assets to carry out the functions and duties imposed on it by this Bill. As the Competent National Authority, the CDC is required to develop, prepare, and publish a National Oil Spill Contingency Plan to guide all coordination and response operations of oil spill incidents or potential oil spill incidents. It faces an immediate uncertainty: the Bill provides no guidance on development processes, consultation requirements, approval mechanisms, or update frequency. Even though it is a “National” plan, there is no indication whether the plans of various companies and sectors, including those of the oil companies, are to be incorporated into the National Plan.

The other organisational issue is how this Bill will alter the CDC’s prior focus – the management of disasters.

The Prosecution Puzzle

Another feature of the Bill is the bewildering array of offences – from failing to submit plans to refusing to respond to spills – with penalties ranging from fines to mandatory three-year prison terms. Yet remarkably, it fails to specify who will bring these criminal charges or which courts will hear them. The legislation simply states that responsible parties “commit an offence” and “shall be liable on summary conviction” or “on conviction on indictment,” leaving prosecutors, defendants, and courts to guess whether the Director of Public Prosecutions, the CDC, the EPA or some other authority has the power to initiate proceedings. The Attorney General did not name the Office of the DPP as one of the persons and organisations consulted.

This omission creates potential chaos where administrative agencies like the EPA pursue civil penalties while criminal prosecutors pursue parallel charges in different courts for the same conduct.

The link with the Deal of the Millennium

The greatest threat from any environmental disaster comes from the operators of the Stabroek Block, which controls over eleven billion barrels of oil. Clause 10 of the Bill requires oil companies (the “responsible party”) to submit their contingency plans which must align with or be incorporated into the National Oil Spill Contingency Plan. The problem is that the 2016 Agreement has its own provisions dealing with environmental disasters, including oil spills. Yet, this Bill conspicuously avoids directly addressing how it interacts with the existing 2016 Petroleum Agreement between Guyana and the ExxonMobil consortium, particularly the Agreement’s powerful stability clause in Article 32.

Oil companies will therefore have two obligations and two options. They can point to either the Agreement or the Bill, whichever is more favorable, while taxpayers fund the oversight system.

International Outlier

Almost every speaker on the Government side spoke of the international standing of Guyana’s Bill, with several countries cited as sources from which this Bill was drawn. That is not supported by evidence from several countries. The United States’ Oil Pollution Act of 1990 makes operators the primary responders and creates a trust fund financed by a tax on oil companies. Norway imposes criminal liability on executives for willful violations and maintains strict liability without regard to fault. Canada requires operators to submit prevention plans while maintaining clear operator responsibilities. The UK’s approach focuses on vessel discharges with consolidated controls.

What makes Guyana’s Bill particularly troubling is its funding model – every other country either requires operators to pay directly or ensures operator liability, whereas Guyana’s taxpayers fund the entire bureaucracy. I found no other country with as many layers of bodies and overlapping jurisdictions. The effect of this Bill is that many of the costs are shifted from operators to taxpayers.

Conclusion

The Government has used its majority in the twilight of the 12^th Parliament to rush this Bill through its second and third reading to passage. However, there is no funding for the massive structure and functions contemplated in the Bill, which, along with a range of marine, air, and land transportation assets and technical facilities, will be required to give the Bill a chance of success. Passage of the Bill will prove to be the easy part.

Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 155

Introduction

The National Assembly is scheduled to meet today, as the 12th Parliament moves to a close in preparation for historic elections. The Prime Minister will lead the second reading of the Oil Pollution Prevention, Preparedness, Response and Responsibility Bill tabled last week. At first glance, the unsuspecting reader and observer may believe that the law set out in the 56-page, 39-clause Bill, arranged over eleven parts from Preliminary to Miscellaneous, is progress and development. They would be dangerously mistaken.

Beneath this technical jargon and smooth veneer lies a troubling reality: this legislation may weaken the very protections it purports to strengthen. Perhaps most strikingly is the suspicion that one of the hidden objectives of the Bill is to neutralise the decision of Justice Sandil Kissoon in the successful action brought by Fred Collins and Godfrey Whyte vs. the EPA and (conveniently joined by) ExxonMobil Guyana. If that suspicion is true, it is infinitely worse than the Government seeking to reverse a ruling by the High Court for which an appeal is pending. Such practice is not unusual but is usually only done to plug loopholes and fix lacunae. In this case, it seems designed to relax the regulatory controls over which Exxon appears to call all the shots.

Legislative reversal of Kissoon

To recap, in the Collins and Whyte case v. EPA, Justice Kissoon found that ExxonMobil’s Guyana subsidiary, a major oil company, had operated for eleven months in violation of its permit by failing to provide unlimited liability insurance. Meanwhile, the EPA had “descended into a state of slumber” and acted as a “derelict, pliant, and submissive” regulator.

If the Government persists with this Bill, it is not just legislative malpractice but another egregious abandonment of the national interest, in which we moved from the President’s “Review and Renegotiate to supine capitulation. In close to five years, this Government has failed to close a single annual audit; it refuses to use its powers to set any conditions, such as ringfencing, in production licences. It has engaged in secret deals with Exxon concerning the Gas – to – Shore and, most incredibly, has not enforced the mandatory relinquishment clause in the Agreement.

Despite representing “one of the most critical environmental and economic bills ever presented to our Parliament,” this legislation is being fast-tracked without adequate scrutiny. The Bill’s technical provisions, multiple bodies, unconnected parts, divisions, and sections without clear interconnection, as well as vague drafting that special interests can exploit, make for an almost unworkable arrangement.

MBA – style creation

The legislation creates at least five major bodies: the Civil Defence Commission (as the “Competent National Authority”), its six-member Governing Board, a National Oil Spill Committee with over 20 agency representatives, ad hoc Oil Spill Incident Boards of Inquiry, and a National Emergency Operations Centre. Inescapably, 95% of all these positions are directly appointed by the Minister, with the remaining 5% being ex officio appointments of officials who were themselves politically appointed, creating a system where political loyalty takes precedence over technical expertise. This legislative masterpiece is worthy of a special case study at Harvard Business School under “Advanced Organisational Dysfunction: A Masterclass in Bureaucratic Architecture.” 

This maze of institutions, all operating under vague mandates with unclear lines of authority, virtually guarantees bureaucratic paralysis when swift action is needed. Rather than streamlining response capability, the Bill spreads functions and responsibilities across multiple layers of bureaucracy, creating enough regulatory confusion to allow oil companies to operate with even greater abandon. At the same time, appointees can always point to some other body as being responsible for enforcement. When a spill occurs, who exactly is in charge? The Bill’s answer seems to be everyone – and no one. A disaster dressed up as comprehensive governance.

Taxpayers Pay – Exxon creams

As the structure goes, so do the financial arrangements. Typically, in regulated sectors, it is the players who fund the regulators through a levy. Not with this Bill. The entire elaborate bureaucratic ecosystem – five major bodies, dozens of appointed officials, multiple committees, emergency centres, and boards of inquiry – is funded entirely by Guyanese taxpayers through the Consolidated Fund. This allows the oil companies to operate in Guyanese waters, as the ultimate spillers and polluters of Guyanese shores – and beyond.

What makes this sellout particularly galling is how it exceeds even ExxonMobil’s original expectations. The oil giant has operated for years, knowing it needed unlimited liability coverage – that was the deal from the start. Justice Kissoon insisted on the enforcement of existing obligations.

Clause 22, in plain terms, removed that obligation and placed it on a motley group of ill-defined entities known as the responsible party. In contrast, Clause 21 can be read to render a parent company’s guarantee invalid. Clyde & Co told us that Exxon’s Brook Harris wrote the Cabinet Paper recommending the signing of the 2016 Agreement. I have serious doubts that Brook Harris could have done a better job on this one. Or maybe Brook Harris has a twin. To be continued