Op-ED: State of the Oil Republic

Dec 20, 2021 News

– Ali Govt. makes headway with legislative safeguards but key mechanisms to protect citizens’ interest outstanding

By Kiana Wilburg

Kaieteur News – Since today marks Guyana’s second anniversary as an oil producing State, it is prudent that we reflect on how the PPP/C-Administration, led by President, Dr. Mohamed Irfaan Ali, has managed the Oil Republic.
Without question, the Ali government has demonstrated more speed than its predecessor in bringing before the National Assembly, two key pieces of legislative safeguards—the Local Content Bill 2021 and the Natural Resource Fund Bill 2021.
The former is expected to ensure citizens and indigenous companies have an advantage in the oil sector and that there are consequences when oil companies fail to meet the minimum local content requirements. The latter legislation will allow for the operationalisation of Guyana’s oil fund, which has over US$530M.

President, Irfaan Ali

Both pieces of legislation will be subjected to, hopefully, an informed debate on its merits and demerits before its final passage at year end. While the flaws of the draft legislation ought to be highlighted with the fervent expectation that the government would seek to strengthen same, it is noteworthy that the PPP/C Government has acted with considerable alacrity in bringing these two key legislative mechanisms before the House as it had promised.
There have also been other notable achievements by the PPP/C Government in just one year. These include, but are not limited to: capacity building exercises for lawyers in the fundamentals of the oil sector; strengthening of the environmental permits for ExxonMobil which now caters for the introduction of a US$45 flaring tax; the successful negotiation of oil lifts while resisting the temptation of bilateral agreements; the strengthening of bilateral relations for knowledge sharing with several countries such as the United Arab Emirates and Ghana; and the launch of the Low Carbon Development Strategy (LCDS) to steer Guyana’s pathway for a sustainable energy transition.
The foregoing are all to be commended, especially in the PPP/C’s first year of office, but there still remains several mechanisms which must be put in place if Guyana is to truly govern its oil industry effectively.
Quite frankly, the honeymoon for the PPP/C Government is long over and the citizenry of Guyana will demand to see sturdier safeguards in place to protect their interest. In no particular order, Kaieteur News is of the view that Guyana needs to have the following mechanisms in place urgently:

Senior Oil & Gas Journalist, Kiana Wilburg

1) The Petroleum Commission needs to be in place to ensure the oil sector’s daily operations are independently/apolitically managed;
2) There needs to be an audit of the Liza Phase One, Two, Payara and pre-contract or pre-2016 costs, all of which total more than US$19B. If these crucial audits are not conducted in a timely fashion Guyana would lose the power or right to object to those costs that are found to be ineligible or astronomical;
3) The Environmental Protection Agency (EPA) needs to be given the human and financial resources it needs to be a robust overseer of the sector. It needs to be empowered and not have to rely on ExxonMobil or any oil company’s aerial resources to patrol the armada in its basin for compliance;
4) In addition to the legislative safeguards brought by the PPP/C, other crucial pieces of legislation are needed, such as a National Upstream Oil and Gas Policy, Updated Petroleum (Exploration and Production) Act, Updated Guyana Petroleum Regulations, Petroleum (Environmental Protection & Pollution Control) Regulations, Petroleum Health & Safety Regulation etc.;
5) Kaieteur News is also of the firm conviction that Guyana needs to establish a Depletion Policy that receive input from civil society and industry experts. Such a policy would determine what fields get developed and at what pace. It also puts Guyana in the driver’s seat of what happens with its resources and when;
6) We also need to strengthen key auditing agencies, specifically the Office of the Auditor General as well as those institutions that will be responsible for the expenditure of the oil money – including the Ministry of Finance, the Ministry of Public Infrastructure and the Ministry of Health;
7) We also need to urgently hire technical experts needed within the Ministries of Natural Resources, EPA, the Guyana Geology and Mines Commission (GGMC), the Guyana Revenue Authority (GRA) etc.;
8) Kaieteur News has been at the forefront of calls for the renegotiation of the Stabroek Block Production Sharing Agreement (PSA), so that certain loopholes for massive revenue loss can be closed. Three key loopholes that leave the country exposed are (i) the absence of ring fencing provisions which allow costs for non-producing projects to be deducted from producing fields, (ii) the stability clause that prevents the implementation of any new legislation that affects the economics of the projects pursued by the oil companies, (iii) and the allowance of interests on loans to be recovered which is not an industry practice.
This newspaper has held the view that the PPP/C Government should bring ExxonMobil, and all other oil companies for that matter, to the table to remove any onerous provision that leaves current and future generations at a disadvantage or shortchanged.
The newspaper therefore, maintains this position and will continue to call on the Administration to set a high standard within the oil sector. A standard that says the people of Guyana must get their fair share; the lion’s share of the money made from the exploitation of their oil wealth.