US$112K set aside to revise future ‘billion-dollar’ oil contracts

Feb 13, 2022 News

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…money to also pay for help to update old Petroleum Law — Min. Bharrat

Kaieteur News – Much has been said over the years with regard the one sided deal—Production Sharing Agreement (PSA) or oil contract—that was inked between the Guyana Government and ExxonMobil Guyana back in 2016.

The criticisms levied against the then administration—under whose auspices, the PSA was inked with then Minister Raphael Trotman at the helm of the Natural Resources Ministry—had reached a point where the then opposition had committed to remedying the state of affairs.
Such was the importance of ‘getting it right’ with Guyana’s PSA Model that the People’s Progressive Party Civic (PPP/C) administration had included in its last elections manifesto, the commitment to establish a PSA, “based on industry-wide standards and best practices.”
The purpose, the PPP/C said, “is to ensure that Guyanese receive maximum benefit from these contracts without disincentivising foreign investors in the sector.”
The party had committed to establishing a regulatory framework, which is independent of politicians; build strong national capability to hold oil companies accountable, and to verify production and other expenditures.
During the course of scrutiny of the Estimates of Expenditure for this year, the Minister of Natural Resources, Vickram Bharrat had been asked to provide clarity on a specific allocation under this Ministry when Members of Parliament were told that the sum of $22.4M (US$112,000) had been set aside in this year’s budget to meet the outlined objectives.
He was at the time responding to questions posed by his shadow counterpart, the Alliance For Change General Secretary, David Patterson.
According to Bharrat, the substantive Minister for Natural Resources, the budgeted sum under his Ministry for which Patterson was seeking clarity for, was in fact monies set aside for the hiring of a law firm.
This, he said, was meant to assist government with enhancing Guyana’s legislative and regulatory framework for the sector, in addition to the revision of the PSAs to internationally recognised criteria and standards.
The objective, he repeated, is to end up with a model PSA/oil contract for future deals with oil companies operating in Guyana’s Exclusive Economic Zone EEZ, offshore in order to, “bring far more fiscal benefits to the people of Guyana.
“Work will have to continue to ensure we have a model PSA than Stabroek PSA”
He indicated to the Members of the House that under the provision “we promise to (also) look at the Petroleum Production and exploration Act of 1986,” saying it needs to be updated, and that “this provision will start that process.”
During the discourse, Minister Bharrat had lamented that up until recently, there had not been any commercial discoveries of hydrocarbon outside of the Stabroek Block by any of the other operators, a situation which changed on Monday last when CGX Energy Inc. announced that it had discovered crude in commercial quantities in the Kawa-1 Well in the Corentyne Block.
It would be apposite to note that Vice President Bharrat Jagdeo had last week, subsequent to the announcement by CGX, told members of the media, government is prepared to rise to the occasion to ensure the model PSA will address issues such as higher royalty rates, the need for ring-fencing provisions, as well as those related to taxes.
“CGX Energy Inc. has found oil and there may be now increased pressure because if they move swiftly to production then we will have to get a model PSA in place,” he told members of the media during a press engagement at the Arthur Chung Conference Centre (ACCC) this past week.
The former Head-of-State was adamant work on the PSA was put on the back burner since ExxonMobil was the lone explorer marking all the commercial discoveries in the Stabroek Block.
According to Vice President Jagdeo, with the CGX discovery, “…there is urgency now to move to a model PSA that would correct many of the things we find are wrong with the last one that was signed with Exxon (the Stabroek Block PSA). And all new entrants would have to subscribe to the new conditions. I don’t want to get into too many details but issues raised such as high royalty rate, and ring-fencing, those have to be looked at; tax treatment and a whole range of other issues have to be looked at.”
He elucidated saying, “there are about 10 or 11 areas we identified to look at and they have to do with the fiscal terms.”
According to Vice President Jagdeo, when the time arrives, the government would be ready to engage with CGX and its partner, Frontera.

 

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