25 March 2013

Liberia: Big Risk for Liberia - Ex-Solicitor General Gongloe Dissects Ratification of Oil Block 13

The former Solicitor General of Liberia Cllr. Tiawon Gongloe is urging members of the House of Representatives to reject the new production-sharing contract (PSC) negotiated by the National Oil Company of Liberia with Exxon Mobil for Oil Block 13.

The controversial deal, if ratified by the Legislature, would give Liberia US$50 million up front in a signing fee from Exxon Mobil. Liberia would also receive 10 to 15 per cent royalties on the oil, depending on the depth from which it came.

But in his appearance before a public hearing by a House committee into the renegotiated Block 13 deal Monday, Cllr. Gongloe declared that the PSC should be rejected until Liberians learn lessons from the exploitation of oil and gas under the contracts that have already been approved by the Legislature.

Said Cllr. Gongloe: "No matter how big the bonus may be, it cannot be substituted for insisting on the generation of tax revenue consistent with existing laws."

Gongloe implored members of the committee to proceed with utmost care and in the best interest of the Liberian people with regard to the oil block.

"The people showed their disapproval for the behavior of the Legislature by the way they voted in the legislative election of 2011," Gongloe said.  "So I want members of the 53rd Legislature to do due diligence on each company offering to invest in the oil sector in Liberia on their track record in Nigeria. He called on the lawmakers to be mindful of awarding contracts to company that has been a source of the conflict in Nigeria.

"In the interest of Liberia, you should either reject agreements signed with companies with negative roles in Nigeria or be rigorous in examining such agreements in order to prevent any of the problems caused by them in Nigeria."

Quoting article 24 of the PSC, Gongloe said the National Oil Company of Liberia (NOCAL) in its renegotiated agreement stated that all transactions shall be recorded in dollars without stating the currency, an ambiguity he said, could breed controversy in the future.

Speaking earlier the NOCAL negotiating team headed by Dr. Randolph McClain boasted that the renegotiated contract was the best a non-producing oil country could have.

Justice Minister and negotiating team member, Christiana Tah said: "I cannot defend those who negotiated the previous contract. All I can say is that they did it based on where we were at that time."

Asked if the contract violated the petroleum law of Liberia as alleged by some Liberians, the minister said the renegotiated agreement on Block 13 is in consistent with the national revenue code.

"We don't want the general public getting an impression that we are out there getting kickbacks during negotiations," Tah said. Negotiations require balancing of interests, Tah said. "You can have all the oil and don't have the capacity to explore it, it will do you no good."

Oil expert Lester Tenny said earlier in the hearing that the PSC's accounting mechanisms were not in line with established accounting rules or approved oil and gas accounting rules developed by the international Financial Accounting Standards Board (FASB).

"This contract does not follow any established format and for the purpose of taxation, it makes it nearly impossible for the tax authority to distinguish between the IDC [Intangible Drilling Cost] from equipment cost.," Tenny said. "The contract also lacks accounting appendix (which shows the accounting procedures) attached to the contract ."

Tenny recommended that certain key issues such as royalties and profit-sharing be reviewed and amended.

At the end of the hearing, committee head Rep. Adolph Lawrence (IND-District 15 Montserrado County) said the committee will come out with its final decision after their committee-room meeting, the date of which he did not disclose.

Meanwhile the Senate has ratified Block 13 contracts after amending them to give NOCAL five per cent  of royalties and citizens in drilling regions 10 per cent. Previously citizens were to get five per cent and NOCAL was to receive 10 per cent.

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