Successful governance of oil sector hinges on clear policies and accountability

Jul 23, 2018 ExxonMobil, News

– Chatham House

If Guyana intends to be successful with the governance of its oil sector, it must ensure that there are clear oil related policies and systems to ensure accountability of the oil wealth to come.
This was recently noted by Chatham House, an international transparency body that helps countries with the governance of their extractive sectors.
The London based body recommended that policies for the oil and gas sector be guided by a clear vision for the development of the country and a strategic view of how the petroleum sector will deliver that vision.
Speaking to other guidelines, Chatham House warned that the rush to adopt international best practices may not always be appropriate in the case of emerging producers in the oil and gas sector. Instead, Chatham House said that the government should aim for more appropriate practices, taking account of the national context.
Chatham House said, “In order to attract the most qualified oil company to a country with an unproven resource base, the host government can invest in geological data, strengthen its prequalification criteria and ensure transparency. It should also plan for success and anticipate the implications of hydrocarbon discoveries in its tax code, and be robust through declining oil and gas prices.”
As for the aspect of licensing, Chatham House said that this is a key mechanism whereby government can reap early revenues and maximize long-term national benefits. It said that government must ensure that it simplifies both negotiations and tax structures to mitigate knowledge asymmetries with oil companies.
It said, too, that the government and industry must engage and share information with communities to manage local expectations regarding the petroleum sector and build trust.
It said, “In emerging producers, budgets for local content may be small and timelines for building capacity short. In this context, the focus should be on the potential for repeat use of any local capacity developed. Additionally, meaningful participation of national organizations in resource development is a central objective of many emerging producers.”
The international body said that once the aforementioned are followed, Guyana would be well on its way to laying a strong foundation for the protection of the oil sector.