The case filed by Kaieteur News’ publisher Glenn Lall seeking to overturn the tax exemptions granted to oil companies under the Production Sharing Agreement (PSA) for oil drilling exploration in the Stabroek Block, has been dismissed by High Court Judge Nareshwar Harnanan.
In dismissing the Judicial Review Application (JRA) which had challenged the PSA granted to Esso Exploration and Production Guyana Limited (EEPGL), CNOOC NEXEN Petroleum Guyana Limited and Hess Guyana Exploration Limited, and had sought a host of declaratory reliefs against the companies, Justice Harnanan found that all of Lall’s contentions had no basis in law and in fact.
His main complaint was that Article 15 of the June 27th, 2016 PSA signed by then Natural Resources Minister Raphael Trotman, inter alia, granted exemptions to persons other than licensees in violation of Sections 10 and 51 of the Petroleum (Exploration and Production) Act (PEPA). As a result, he argued that the PSA is unlawful, null, void, and of no legal effect.
After examining Sections 10 and 51 of the Petroleum Exploration and Production Act, the Judge held that the provisions give the minister the power to issue an order exempting certain laws, including tax exemption laws, to a licensee who has entered into a PSA with the government.
This order, the Judge noted, shall be subjected to resolution by the National Assembly and applies directly to the oil companies and indirectly. For context, he quoted from an oil and gas textbook which, among other things, stated that operators in the industry “cannot avoid contracting out”.
Having regard to this as well as the literal and contextual meaning of those two provisions, the Judge further found that the additional entities under the PSA, including affiliate entities and expatriates, are connected to the licensees, and are thus also entitled to these tax exemptions.
“And it could only reasonably be said that parliament had such entities in consideration with grafting the provisions,” Justice Harnanan as he delivered his ruling virtually.
Lall had argued that “licensee” as defined by the PEPA refers only to EEPGL, CNOOC NEXEN Petroleum Guyana Limited, and Hess Guyana Exploration Limited and not to any other person.
In addition, Lall had also asked the High Court to declare that Article 15.12 of the PSA violates Article 149 of the Constitution which provides for protections against discrimination. But in refusing to grant the declaration, the Justice explained that he is of the view that any Act or provision of an Act of Parliament, including the Petroleum Exploration and Production Act, can only be eligible to be struck down if it is proven to be incompatible with the Constitution.
In this case, he ruled that the subject minister acted within his powers to permit remission under the Petroleum Exploration and Production Act, and Article 15.12 is as such intra vires the Constitution.
“The tax exemptions were given legislative effect made pursuant to the PEPA.”
For the foregoing reasons, Lall’s JRA was dismissed with costs to be assessed if not agreed upon.
EEPGL and its co-ventures and subcontractors had sought the dismissal of the case which it had described as “misconceived, and without merit” while referring to the over US $13B they had already spent on projects, development, well exploration, and production activities in the Block.
Edward Luckhoo, SC, and Andrew Pollard, SC represented the oil companies while Attorney-at-Law Mohamed Ali appeared for the newspaper’s publisher who filed the case in January 2022.
The ruling was handed down on Wednesday at the High Court in Demerara.
PEPA is an Act that applies to the exploration, exploitation, conservation, and management of petroleum existing in its natural condition on land in Guyana, including the territorial sea, continental shelf, and exclusive economic zone (EEZ) of Guyana.
