Latest update September 16th, 2024 12:59 AM
Nov 20, 2016 AFC Column, Features / Columnists
The Ministry of Natural Resources collaborated with the New Petroleum Producers Group (NPPG) to host a two-day seminar last Thursday and Friday titled: “Governance of the Petroleum Sector: Preparing for First Oil”. The Petroleum Producers Group is an arm of Chatham House, the Royal Institute of International Affairs, and includes technical advisory groups, emerging producers and the more established producers and associate organizations. They partnered with the Commonwealth Secretariat and the Natural Resources Governance Institute (with offices in the UK, USA, Ghana, Peru and Jakarta).
The main aim of the seminar was to assist Guyana with establishing the most appropriate and effective institutions that will ensure good governance of our petroleum sector. The first day was specially tailored for Government Ministries and Agencies responsible for regulation, development of fiscal systems and oversight mechanisms. On the second day, Certified Accountants and Attorneys-at-Law were invited to participate in the discussions about their roles and capacities with respect to the legal frameworks, contract negotiations, financial risk management and internal controls.
The seminar was officially opened by Minister of Natural Resources, Raphael Trotman. Below are excerpts from his opening remarks:
In May of 2015, international offshore oil explorer, ExxonMobil, reported its discovery of hydrocarbons in the Liza-1 exploration well. The well was drilled by ExxonMobil affiliate, Esso Exploration and Production Guyana Ltd. and its joint venture partners Hess Guyana Exploration Ltd. and CNOOC Nexen Petroleum Guyana Limited. This was just over a year ago and much has transpired. We are in an extraordinary process of transformation for our nation.
We now know that the Liza well contains a substantial deposit estimated to contain 800 million to 1.4 billion barrels of high quality crude oil. ExxonMobil and its joint venture partners have been working around the clock gathering data, assessing the reservoir, and performing the numerous investment calculations. On Wednesday 16th November 2016, they made Guyanese history by being the first to formally notify the Government of Guyana, in keeping with the Petroleum (Exploration and Production) Act Cap 65:01 that the discovery of oil is of commercial interest. This was the trumpet call that heralds the coming of “first oil”. There will now be greater expectations, great excitement and greater responsibilities in the weeks and months ahead.
The Government of Guyana received that notification on behalf of all citizens of Guyana. It was a watershed moment in our nation’s history that alters the political, economic and social DNA of our present and future, and we are extremely blessed to have this opportunity to develop with Exxon, Hess and Nexen as our partners.
Our new hydrocarbon industry is beginning to develop in the context of today’s crude oil prices which hover around what generally is a discouraging US$50 pb. But it gives us the leeway to plan and implement our petroleum sector (from the ground up) more wisely and prudently. In essence, we have entered the global petroleum industry at a conservative and watchful time. Our focus is on considerations of the possible returns on this investment and how we can maximize them for the benefit of our nation for generations to come.
MITIGATING RISKS AND THREATS
Development of an oil and gas sector is notorious for the risks and threats it poses to economic and political stability, and to the environment. Management of the sector is going to be a major challenge for Government and domestic institutions. Government must utilize its institutions and regulatory frameworks to ensure transparency and efficiency in the management of oil revenue. In addition, oil revenue must be directed towards productive investments in physical and human capital for long-term sustainability and equitable growth.
Guyana has sought and received support from a number of international experts. Our partners include the UNDP, the Commonwealth Secretariat, the US Government through their Energy Governance Capacity Initiative, the Canadian Government through the University of Calgary, and the Government of Mexico in an initiative to establish our own Petroleum Scientific Institute, and of course, the NPPG.
BENEFITS FROM NPPG
The New Petroleum Producers Group (NPPG) is designed to provide the platforms for open conversation in new and emerging states on the global oil and gas industry with the experts in the field. The conversations focus on strategy formulation for good governance, and sustainable business practices with good environmental safeguards. Guyana has been a participant in these discussions for the past few years but our participation in the March 2016 meeting in Kenya, nine months after the first announcement of a viable oil find, took on a different tone. This country shifted from a ‘hopeful’ new petroleum producer to a ‘soon to be’ new petroleum producer.
The NPPG is carrying out its mandate by imparting advice and support as requested, and has made Guyana the beneficiary of an open exchange programme with Uganda called a “mentoring exchange”. Uganda was chosen because the country only recently completed preparations for oil production set to begin in 2017. Because Guyana is on a similar path, we stand to benefit from the recent experiences of Uganda which has met international requirements.
A delegation from Uganda comprising two senior officials from their Ministry of Energy and the Uganda-based NPPG branch were present at the seminar, visiting Guyana for the first time. The seminar was also facilitated by a team of international experts, new and experienced petroleum producers and advisors from Ghana, Suriname, Trinidad, Liberia, the UK and the USA.
PUBLIC CONSULTATIONS
A suite of new policies and legislation will soon be presented for public review and consultations. They address the governance, regulation and development of our petroleum sector and the establishment of the institutional framework and agencies. That compendium is scheduled to be completed in draft by December 31st 2016. It includes:
i. National Oil and Gas (Upstream) Policy
ii. Local Content Policy
iii. Petroleum Exploration and Production Legislation and Regulations
iv. Petroleum Commission Legislation (regulation and oversight)
v. Petroleum Taxation and Fiscal Legislation
vi. Sovereign Wealth Fund Legislation, which will include provisions for a Stabilisation Fund, an Infrastructure and Social Development Fund, and a Citizens Participation Fund.
(To be continued)
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