Royalty provision in Stabroek PSA differs from Petroleum Act

Royalty provision in Stabroek PSA differs from Petroleum Act – Ramon Gaskin

Sep 22, 2019 News

Activist, Ramon Gaskin, has drawn attention to a troubling disparity between the Petroleum Act and the Production Sharing Agreement (PSA) which governs the Stabroek Block.

Minister of Natural Resources, Raphael Trotman

During a forum at the Critchlow Labour College last Thursday, the Accountant said that the problem with the royalty provision in the Contract is in how it is payable.
The PSA states that the Contractor shall pay a Royalty on the Petroleum “produced and sold”. The provision allows the Contractor to take as much from the production as is needed for its operations, in terms of fuel and transportation.
On the other hand, Article 45 of the Petroleum (Exploration and Production) Act, states that “Subject to this Act, the holder of a petroleum production licence shall, in accordance with his licence and this Act, pay to the Government royalty in respect of petroleum obtained by him in the production area to which the licence relates.”
“So there’s a difference between the agreement and the Act, on this question of how royalty is to be charged. The Act is clear. They used the verb ‘obtained’. If you obtain it, you pay,” Gaskin stated, during Thursday’s forum.

Attorney-at-Law, Christopher Ram

Activist, Ramon Gaskin

He said that the stipulation in the agreement about royalty being paid only on what is produced and sold is problematic.
The difference between the Act and the PSA is striking. Further, the royalty has been a point of controversy ever since it became public knowledge. It has been criticised for being way below the industry average.
Fred Collins of the Transparency International Guyana Institute (TIGI), who presented at the same forum, described breaches by this PSA as biblical, and urged that the provisions of it be “regularized”. He stressed that all provisions of the contract must be brought into conformity with the law.
It should be noted that Article 27 of the same agreement, titled ‘Applicable Law’ states “This Agreement shall be governed by, interpreted and construed in accordance with the laws of the Cooperative Republic of Guyana, and, consistent with such rules of international law as may be applicable or appropriate, including the generally accepted customs and usages of the international petroleum industry.”
Attorney-at-Law, Christopher Ram, concurs with Gaskin’s assertion that there is an inconsistency between the Act’s definition of royalty, and that of the PSA.
Speaking to Kaieteur News, Ram said that it is important to note that the law takes precedence over the agreement. He stressed that Minister Trotman is not permitted to enter into an agreement that is inconsistent with the law, and that if that is found to be the case, the inconsistency must be struck down.

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