Latest update December 23rd, 2024 3:40 AM
Decision on national oil company next month
Kaieteur News – Guyana is exactly one month away today, from making one of the biggest decisions it will with regard to its lucrative oil and gas industry; whether to use its remaining available acreage in the formation of a National Oil Company (NOC) or not.
The government is expected to make a pronouncement on this decision in September as the country grows closer to its first competitive auction for open acres offshore Guyana in the third quarter of this year. It is likely that the move to bid could see the NOC going on the back burner.
Vice President Bharrat Jagdeo had announced in April that the NOC decision would be made based on studies and work being conducted by the government and its technical team, but had ruled out the potential for fresh seismic studies owing to the favourable situation the oil market currently enjoys. Where the seismic study is concerned, the VP had said that oil price is high, and believed that now is the right time to go to the auction, “using the current data set, not generating future data sets.”
Should the government go ahead with the creation of the NOC, it said it has its sights set on a “strategic partner” with the government playing a very passive role in the management of the company. It has not been specified how the government actually intends to work with the strategic partner, but claims that one of its main goals is to keep away from the traditional structures of a NOC in its bid to alleviate corruption, while at the same time, determining whether the establishment of the company will significantly increase the country’s revenue from other streams such as its Production Sharing Agreement (PSA).
The VP had submitted that based on what is seen regarding existing NOCs, the examples have not been encouraging. He said that more cons than pros seems to exist in this situation with questions being raised about the time it would take to develop a NOC, the overload on domestic capacity, and the corruption usually associated with these entities.
The VP had added that with the net zero target by 2050, it becomes even harder to raise money globally for a NOC; while having the company hold the remaining assets could actually concentrate things and cause a slowdown in the development of the sector.
Government said its consideration of an NOC is to secure a seat at the decision making table where Guyana can have a better say in relation to its oil endowments. While this may sound like a logical and ambitious idea to be at the table, several experts have warned Guyana against a NOC, especially at this early stage of industry development.
The World Bank for instance, has advised Guyana to be mindful of such a feat, and instead ensure systems and mechanisms that support the country having a bigger take from its PSA and generally, from the production of its hydrocarbons.
Other experts, such as Arthur Deakin from the Co-Director of the Energy Programme at Americas Market Intelligence, also urged Guyana to wait and develop its oil and gas oversight and management capacity if it really wants to have its own NOC.
Deakin had opined that the government should give itself at least two years to improve its capacity, while putting in place the structures that support optimal results from the agency.
A Reuters interview with President Irfaan Ali during his visit to Washington just days ago, said that the head of state sought to use his time during the US visit “to call on energy companies there to participate in the bidding round, scheduled for the third quarter.” He told the news agency that the government expects that an upcoming auction for oil and gas blocks will attract new companies to its energy industry.
The report said that the government is also in talks with investment funds from Saudi Arabia, United Arab Emirates and Qatar to secure financing for its nascent oil industry.
The country’s current oil discovery stands at more than 11 billion barrels of recoverable oil from its Stabroek Block operators. From that project alone, it expects to be pumping some 1.2 million barrels of oil per day by 2027.
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