Govt. has no say on Exxon's budget for Guyana

Govt. has no say on Exxon’s budget for Guyana

May 13, 2020 News

This is an odd feature in Stabroek Block PSA – Int’l Lawyer

When it comes to managing the oil industry the State needs to have reasonable control over the amount, nature, and location of activities that take place. According to International Energy Lawyer, J. Jay Park QC, Guyana’s Petroleum Act and Regulations, and even the Stabroek Block Petroleum Agreement do a good job where this is concerned.

International Energy Lawyer, J. Jay Park QC

During his recent analysis of the country’s petroleum regime, he noted that the government has to give its approval for the development of plans of oil companies, extensions for the relevant contractual awards, and even for farm-in arrangements.
Park noted however that there is a bit of an oddity in the Stabroek Block agreement with ExxonMobil, in so far as there is no legal requirement for the approval for annual work programmes and budgets. Considering this flaw, Park said he would give Guyana a B grade for the level of control it has on activities within the industry while noting that it can be improved.
Further to this, the International Lawyer was keen to note that one must bear in mind that Guyana is still an emerging producer; therefore, it is very common to find gaps in the petroleum regime. Park said that Guyana’s regime is still to address issues such as well abandonment, gas production, and the effective monetization of its resources while noting that initiatives are underway to do this. In this respect, he noted Guyana received a US$20M loan from the World Bank to improve its capacity to govern the oil industry.
The loan agreement, which was signed in 2018, notes that the World Bank will provide support for Guyana to assess and conduct economic and fiscal modeling, allow the authorities to forecast oil and gas revenues, and also support Guyana in the areas of revenue administration and taxation.
The agencies which stand to benefit from this support include the Department of Energy, the Guyana Geology and Mines Commission, the Ministry of Finance, the Guyana Revenue Authority and the Petroleum Commission once established.
Already, several contracts have been awarded using part of the US$20M loan but local and international transparency advocates are contesting same since the successful awardees are Exxon-linked contractors. There are currently calls for the World Bank loan to be halted until a full scale investigation can clear up all perceptions of conflict of interest.