Separate agreement almost complete to ensure accountable measuring of Guyana’s oil-Govt. Advisor says document will be made public

May 04, 2019 News

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By Kiana Wilburg
Guyana’s contracts with some of the world’s major oil operators are utterly silent on how the extracted oil will be measured to ensure accuracy. It

appears, however, that all hope is not lost. According to Petroleum Advisor to Government, Matthew Wilks, a separate agreement is being worked on to ensure the accountable measuring of Guyana’s crude.
Wilks made this revelation during a press conference that was held yesterday at the Ministry of the Presidency. There, Kaieteur News pointed out this major weakness that is present in all of Guyana’s contracts and challenged the Advisor to say if this will be addressed in the nation’s model Production Sharing Agreement. Wilks said, “Procedurally, yes.”
He said, too, that a Crude Lifting Agreement is being worked to ensure the precise metering of the oil.
Wilks said, “…That agreement contains all the metering checks and that document is in an advanced stage of preparation and it is almost complete. What we are going through now is a process of getting various agencies within Guyana ready for crude lifting because one of the things going out to tender right now is for a Crude Lifting Advisor…to assist us in arranging a marketing arrangement for the government’s share (of its oil).”
The Petroleum Advisor added, “But in terms of the accuracy of metering, how you meter, who checks…that is all contained in the Crude Lifting Agreement. And that will be signed by all parties.”
Asked to say if the document will be made public, Wilks said, “There is not an issue to making it public. We are quite happy to make it public.”
KAIETEUR EXPOSES
It was in February of this year that Kaieteur News had exposed the Production Sharing Agreement Guyana has with ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), CNOOC and Hess, has no provision in place which speaks to the country’s right to verifying the operator’s oil production.
Other nations like Trinidad and Tobago, for example, have rigid rules, agreements and regulations in place on this matter.
With respect to its PSAs with oil firms, Trinidad has an entire section on Measurement.
Provisions 19.1 and 19.2 under that Section say, “All Petroleum produced, saved and not used in Petroleum Operations shall be measured at the Measurement Points approved in the Development Plan. The Measurement Point shall be at the end of the facilities for which the cost is included as a recoverable cost of Petroleum Operations under the Contract.”
At provision 19.3 it adds, “The Production shall be measured in accordance with the sound and current practices and standards generally accepted in the international Petroleum industry. All measurement equipment shall be installed, maintained and operated by Contractor.
“The Minister shall have the right to inspect the measuring equipment installed by Contractor and all charts and other measurement or test data at all reasonable times. The accuracy of Contractor’s measuring equipment shall be verified by tests at regular intervals and upon the request of the Minister, using sound and current means and methods generally accepted in the international Petroleum industry.”
Upon discovery of a meter malfunction, Trinidad’s PSAs make it clear that the contractor shall immediately have the meter repaired, adjusted and corrected and following such repairs, adjustment or correction shall have it tested or calibrated to establish its accuracy. Upon the discovery of a metering error, the nation also requires that the contractor have the meter tested immediately and the necessary steps taken to correct any error that may be discovered.
In the event a measuring error is discovered, the nation sets out in its PSAs that the Contractor shall use its best efforts to determine the correct Production figures for the period during which there was a measuring error and that the corrected figures shall be used. In determining the correction, the nation notes in its oil deals that the Contractor shall use, where required, the information from other measurements made inside or outside the Production Area.
The oil contractor signed to a PSA is also required to submit for the Minister’s approval, a report detailing the source and nature of the measuring error and the corrections to be applied.
If it proves impossible to determine when the measuring error first occurred, PSAs noted that the commencement of the error shall be deemed to be that point in time halfway between the date of the last previous test and the date on which the existence of the measuring error was first discovered.
IMPORTANCE OF METER ACCURACY
Canada-based organization, Publish What You Pay (PWYP), has also sought to enlighten nations over the years, on the importance of having provisions in place for monitoring metered oil.
In fact, it has published a detailed report documenting how many countries have suffered for failing to have an independent team monitoring the oil being metered and assessed by oil companies.
In its report, it quotes the Norwegian Petroleum Directorate as saying that “even small deviations in the volume of production can have a significant impact on government revenues.”
In their example, an error of just 0.35 percent at one of their metering stations would amount to a loss of four million NOK (US$660,000).
PWYP also stated that ensuring fair taxation depends not only on tracking the volumes of the resource produced, but also that they are applied against each relevant fiscal instrument.
The anticorruption entity also stressed that the solution to protecting government revenues from under-reporting of production by oil companies is effective monitoring of both the quantity and quality of the natural resources extracted and exported. A failure to address this has resulted in oil producing nations losing billions of dollars in profits.

 

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