COLUMN | Guyana: Big oil, bad votes, and worse political problems [Offshore Accounts]

Liza Destiny (Photo: SBM Offshore)

Doesn’t time fly when you have a million oilfield workers out of work, a viral pandemic and a global economic recession? In March 2019 we were warning here that Guyana was at a turning point, as President David Granger and his A Partnership for National Unity coalition government faced a political crisis, just as the Latin American country was about to reap the benefits of the massive oil discoveries in the Caribbean nation’s deep water Stabroek block, made by ExxonMobil and its partners.

The stakes are high as the cash comes in

And, so it came to pass. On March 2, Guyana held a bitterly fought and desperately close election between Granger and Irfaan Ali, the candidate of the mostly Indo-Guyanese People’s Progressive Party, led by former president Bharrat Jagdeo. President Granger’s political support, meanwhile, comes mainly from the Afro-Guyanese community, and he had narrowly won victory in the 2015 election, beating Jagdeo, just as ExxonMobil began a remarkable run of 18 successful deep-water exploration wells offshore.

With eight billion barrels of recoverable oil now found in Guyana’s waters (full details here here), and billions of dollars of revenue likely to flow into the coffers of the Guyanese government following the production of first oil from the Liza Destiny FPSO just before Christmas last year, the political stakes in a country of just 800,000 people have got massively higher. The local press has been avidly following the arrival of royalty payments at the country’s hitherto cash-strapped treasury.

The second royalty payment was reported as having been deposited in the central bank in Georgetown on August 2 (here). The new president will get to spend the money.

Vote count flawed

The 2020 election ended up hingeing on the votes of just one constituency of the ten electoral districts, the largest, Region 4. It was immediately apparent on election night that all was not well in the vote count there. Returning Officer Clairmont Mingo said he suddenly felt ill before the tally of the ballots was completed in front of foreign electoral observers, who included many regional and Commonwealth diplomats.

At his request, Mr Mingo was taken to hospital, and the tabulation of the votes was suspended, whilst a suitable substitute returning officer was found. The replacement promptly immediately pleaded sickness as well, and so the tabulation did not restart.

Granger’s Minister of Foreign Affairs, Karen Cummings, then arrived at the vote count, summoned all foreign observers together and threatened to revoke their accreditation. Then, the next morning, police reported that there was a bomb threat to the building, and that everyone had to leave.

That evening Mr Mingo, wondrously restored back to health, read out the results for Region 4. He claimed that Granger’s coalition had won by 59,077 votes, conveniently just enough to give them a one-seat majority in the National Assembly, which would elect the next president.

Opposition and observers cry foul

Unfortunately, no one else was buying this in the circumstances, definitely not the PPP opposition and definitely not the foreign electoral observers, especially since the Region 4 results were officially issued under the signature of Granger’s Minister of Health, rather than that of Mr Mingo. Quick off the mark, Granger immediately addressed his followers and declared victory.

However, the PPP obtained a court injunction preventing Mr Mingo from declaring the Region 4 election results until further third-party verification and independent checking had taken place. The opposition organised demonstrations and the country’s political process ground to a halt with neither side willing to give up.

The supreme court ordered a recount of the votes, and Guyana is currently trapped in a political impasse, as Granger seeks to use the courts and his election officials to stay in power, and the PPP opposition and foreign diplomats seek to compel him to accept the result graciously and peacefully stand down. In words that may yet prove deeply ironic, the American Secretary of State, Mike Pompeo, called for President Granger to “step aside” last month, and the Trump administration announced visa sanctions on members his government.

The Miami Herald has the full account of the lengthy recount process and the diplomatic efforts to secure Granger’s departure here.

Through the Mangal

Former presidential Petroleum Adviser, former Chevron manager, and perpetual thorn in the side of ExxonMobil, Guyanese citizen Dr Jan Mangal has argued that only one entity benefits from the political stalemate in Guyana: ExxonMobil.

Mangal argued that if President Granger refused to accept the election result and refused to hand over power, then Guyana would likely be subject to international sanctions, but that since that ExxonMobil is such “a very important company” to the US, “the sanctions would be executed in such a way that it protects the oil giant’s profits”, the local press in Georgetown reported here. Mangal argued that Guyana being in such a weakened state would make “an ideal playground” for ExxonMobil.

Mangal believes that “the American company thrives in countries which are falling apart”. He observed, “Look around the world in places like Chad in Africa and elsewhere. [ExxonMobil] actually do better commercially in those environments. They do better in places which are falling apart, in places where there is civil war, in places where there is an illegitimate government, where there is dictatorship.”

Exxon needs Guyana, Guyana needs Exxon

If Granger does manage to cling onto power in Guyana it will be interesting to see how both the US government and ExxonMobil respond. On July 31, ExxonMobil announced its second quarter results, which were dreadful, with the international upstream production business reporting a loss of US$1.7 billion, compared with a US$3.3 billion profit in the same period a year ago.

Despite first oil in Guyana, the company also saw a drop in production and its stock price has dropped 30 per cent in the last six months.

Stena Carron (Photo: Stena Drilling)

Even as the red ink flowed, ExxonMobil and its partners announced that the drillship Stena Carron had discovered two more “high-quality” reservoirs at undeveloped Yellowtail field off Guyana. The DP drillship Noble Don Taylor started drilling the Redtail exploration well last month, very close to the successful Yellowtail-1 well.

Guyana is critical to ExxonMobil’s future, but a stable and transparent democracy in Guyana is critical to the population there, just as those oil royalties roll in from the company.

Let’s hope that Dr Mangal is wrong and that Guyana can show the world that democracy and oil riches are not incompatible. Guyana deserves better than a stolen election and an illegitimate president who won’t leave office.

Elsewhere – Warning by Monaco against SBM whistle-blower

Finally, we covered the sad tale – here – of yet two more cases involving individuals who have been convicted of bribery on behalf of SBM Offshore, which designed and built the Liza Destiny FPSO. At the end of last week, the Principality of Monaco struck back on behalf of SBM.

The British whistle-blower, Jonathan Taylor, who had initiated the investigations into the company’s massive and longstanding corrupt practices, after working in the FPSO company’s legal department, was arrested upon arrival in Croatia, where he had planned to take a holiday. Taylor was detained under an Interpol warrant from Monaco, based on a criminal charge against him there dating back to 2014, when SBM Offshore had filed a complaint against him in Monte Carlo for attempted extortion.

Mr Taylor maintains his innocence. You can read the coverage of his arrest and the background here in the Dutch press.

W Somerset Maugham famously described Monaco as, “a sunny place for shady people”. Shady companies too, it seems.

Britain takes cash from Afren crooks

If SBM’s bribery seems to have been mainly for the benefit of the company and its Brazilian agent, the recent case against bankrupt Nigerian producer Afren’s former executives shows how sometimes fraud and embezzlement in the oil industry are simply to the personal benefit of senior executives. We first reported on the Afren case here.

On July 31, the British Serious Fraud Office secured a GBP5.45 million (US$7.1 million) confiscation order against Afren’s former CEO, Osman Shahenshah, and its former COO, Shahid Ullah. As the SFO put it on their announcement here:

“After deceiving the board of Afren into a US$300 million deal from which they personally stood to gain over $17 million, Shahenshah and Ullah were each found guilty of one count of fraud and two counts of money laundering in October 2018. The two men hatched the scheme following a shareholder revolt which objected to their GBP6.6 million and GBP3.8 million salary packages and threatened the possibility of lower remuneration in future. Seeking to maintain their high rate of pay, they created a side deal with one of Afren’s Nigerian oil partners whereby 15 per cent of Afren’s payment to the company would be paid out to a Bermudan shell company controlled by Shahenshah and Ullah.”

The greed of some in the industry knows no bounds. Cry me a river for this crooked duo. How much more dirty money from the oil and gas industry will be found swilling around London and the British dependencies if the authorities really start looking?

Hieronymus Bosch

This anonymous commentator is our insider in the world of offshore oil and gas operations. With decades in the business and a raft of contacts, this is the go-to column for the behind-the-scenes wheelings and dealings of the volatile offshore market.