Finance Ministry, GRA should have key role in wording Model PSA provisions -IMF

Jan 26, 2019 News

By Kiana Wilburg
The Ministry of Finance and the Guyana Revenue Authority (GRA) should have primary responsibility for the wording and interpretation of fiscal and tax provisions of the Model Production Sharing Agreement (PSA) that is being pursued by the Energy Department.
This is according to the International Monetary Fund (IMF).
The organization is assisting Guyana in preparing for the oil sector. The Fund said it is necessary to have these two institutions involved in the aforementioned process so as to mitigate loopholes and improve and control the audit of recoverable costs.
In addition, the Fund said that leadership on fiscal provisions and petroleum costs audit should be given to the Guyana Revenue Authority, which it stressed has experience in tax audits.
Energy Department Head, Dr. Mark Bynoe, had told Kaieteur News that his office will be revising Guyana’s model Production Sharing Agreement to ensure the country gets the “biggest bang for its buck.”
Dr. Bynoe had said, “We currently have a PSA and it is what we used in the case of Exxon. As you would understand, we want to ensure we review that in its entirety because there will be things that will need tweaking and that goes without saying. The idea is to have a model PSA, which is more contextual to our current reality and where we are going.”
The official added, “That model PSA, once it is in place would be looked at by the Department (continuously) and it will be applied and tweaked where necessary.”
Dr. Bynoe had also sought to stress that the PSA would not be a one-size-fits-all approach. He said that there would be times when it will need to be amended depending on the context of the situation that obtains.
He had elaborated, “What I am saying is that it will depend on the context of the situation. Let us say, for example, you have inland wells that you have no interest coming forth, except for one person who wishes to pursue some exploratory action there.
“Do you think an open market tender is the best route to go? (No) So that is all I am saying. It will depend on the situation, location, context and everything.”
Dr. Bynoe had added, “What we are interested in ensuring is that Guyana gets maximum returns on its resources and that those resources or the benefits derived there from would redound to Guyana. The entire focus is to ensure we are getting the biggest bang for the buck.”

JORDAN AGREES
Finance Minister, Winston Jordan, is also of the view that the existing template for Production Sharing Agreements must be revised. He made this position quite clear during his reading of budget 2018.
The Finance Minister had said that the discoveries by ExxonMobil have de-risked the basin and has resulted in the significant ramping up of exploration activities in other already-allocated offshore blocks.
In light of the discoveries, the economist said that the Government also anticipates significant interest in exploring the unallocated blocks of Guyana’s de-risked, offshore basins. As such, the Finance Minister said it is imperative that the Government safeguard the rights of the nation to a fair share of resource wealth.
He said that in order to do this, the existing template of the Production Sharing Agreement must be revised to be more accommodating to changing commodity prices while maintaining a level of progress that is responsive to profitability.
The Finance Minister had said that while the Government strengthens its ability to negotiate more equitable PSAs, key agencies within the recently established Inter-Ministerial Technical Committee on petroleum will continue to coordinate capacity building and interactions with the industry.

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