Govt. to give Guyanese two weeks to peruse and make recommendations on new oil contract

Dec 21, 2022 News

Kaieteur News – Guyanese will be given two weeks to examine and make recommendations on the new oil contract being drafted by the Government of Guyana before the document is finalised.

This is according to information published on the Ministry of Natural Resources website.

It was explained that Government would host consultations on the ‘Indicative Terms and Guidelines’ of the Production Sharing Agreement (PSA) between December 12, 2022 and January 31, 2023.

However, the draft model contract would only be released on February 13, 2023 also marking the commencement of consultations on the document. This process is slated to wind down by February 28, 2023.

This means that Guyanese will be granted a mere 15 days to scrutinize the document and offer comments to the Administration. Notably, the second International Energy Conference and Expo will be held between February 14- 1, 2023. This means that stakeholders will be entrenched in the Conference during the consultative phase.

The schedule of events uploaded by the Ministry of Natural Resources

Nonetheless, the Government of Guyana has committed to publishing the final Terms of Reference (ToR) and Model Contract by March 8, 2023. Bids for the 14 oil blocks on auction would be submitted on April 14, 2023 while evaluation will commence simultaneously and conclude on May 5, 2023.

The Ministry of Natural Resources was also keen to note that negotiations with prospective oil block(s) owners will run from May 8 to May 26, 2023, with contracts likely to be awarded by May 31, 2023. These oil blocks will be governed by the new PSA.

During a Press Conference last week, the Opposition said it believes Guyana would be granted a limited time-frame to scrutinize the new model agreement. In fact, the People’s National Congress Reform (PNC/R) Spokesperson on petroleum matters, Elson Low, told Reporters that the consultations may mirror a ‘rushed’ process resembling the passage of the Natural Resource Fund in the National Assembly, last December.

That Legislation was laid in the National Assembly less than two weeks prior to the People’s Progressive Party (PPP) government using its one seat majority to make it law.

The Parliamentary Opposition had called for the Natural Resources Fund Act to be sent to a Special Committee for consultations, however this was not allowed.

The former Coalition Government came in for harsh criticisms for failing to publicize the oil agreement signed in 2016 with United States oil giant, ExxonMobil for the country’s largest oil reserve- the Stabroek Block.

After kneeling to public pressure, the agreement was finally released. This led to the discovery of a number of provisions which stakeholders believe largely favour the oil company.

For instance, Guyana is only receiving two percent royalty for its sweet light crude in that contract, while the oil company enjoys a continuous tax holiday.

There is also no ring fencing provision which allows the company to deduct expenses from one project to develop another.

Another benefit enjoyed by Exxon is a 75 percent cost recovery each month. So far, Vice President, Bharrat Jagdeo has assured that these fiscal clauses will be amended in the new contract.

Some of the key provisions that will be featured in the new deal include a 10 percent royalty, 10 percent corporation tax and ring-fencing provision. It would also cap cost recovery at 65 percent of earnings annually.