Opposition wants full parliamentary scrutiny for new model PSA

Mar 17, 2023 News

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 – says two weeks for public input inadequate

Kaieteur News – The draft document of the new model Production Sharing Agreement (PSA) that was released on Tuesday should be subject to the necessary parliamentary processes which will allow for Guyanese to have an adequate review of the contract that will govern future oil deals.

This is the perspective of the combined A Partnership for National Unity  plus Alliance for Change (APNU+AFC).   Speaking at a press conference on Thursday, Elson Low, the Economic and Youth Policy Advisor at Office of the Leader of the Opposition (OLO), posited that the National Assembly presents the correct forum for the document to be properly reviewed.

Low lamented the short timeframe that was given for a national review of the draft new model PSA, asserting that the government should instead allow Guyanese more than two weeks to examine the very crucial document. Low said, “what we are saying is that this document needs to be laid in the National Assembly for it to be properly ventilated so that all of the different areas, some of which will [still] not be apparent after two weeks, can be put out so that the public can have an understanding of it and so that we can address them.”

He opined that, “I think it unbelievable that anyone much less, here in Guyana, would put a document which has $100 billion behind it for a two week review. It is utterly unbelievable and we need to have a proper national conversation around this document.”

Low accused the government of deliberately not giving Guyanese a chance to review the sensitive document. “In the context that in all the questions that we always have around oil and gas issues… In a country in which the oil and gas industry is going to be vital going forward, it is not acceptable that such major documents are not subjected to proper public scrutiny,” he said.

PNCR member, Mervyn Williams shared similar contentions. He asserted that not only does the Opposition believe that it is necessary that the document should be laid in the National Assembly but also to be put it before a special select committee that allows for the involvement of the Guyanese citizenry in the national conversation.

“This type of discussion is absolutely necessary,” Williams stated. Additionally, Williams lamented on the lack of oversight of the Parliament for Guyana’s increasing natural resources. Williams emphasized, “it is evident that natural resources has grown in its importance to this country yet we do not see the Natural Resources Sectoral Committee of the Parliament meeting to discuss these issues.”

“That sectoral committee has the authority to summon before it, Ministers of Government and heads of agencies to discuss these issues, so that even if the People Progressive Party does not lay before the National Assembly an important document for discussion and debate, that committee can summon the relevant Heads of Department before it to get answers on behalf of the people of Guyana. That committee does not meet which is chaired by the People Progressive Party and there seems to be no urgency with respect to the committee meeting,” he noted.

The Guyana Government on Tuesday released two drafts of new Model PSAs, one of which will govern shallow water blocks while the other will apply to deep water concessions.  Citizens were granted two weeks to peruse the documents that will feature in the upcoming licensing round for the 14 oil blocks. When compared to the controversial Stabroek Block PSA, signed with an ExxonMobil-led consortium in 2016, it is clear that the government made deliberate efforts to close several dangerous loopholes for abuse and revenue leakage. A significant feature in the new draft agreements is that the government has preserved the right to review and approve the budgets for the exploration and development programmes of the oil companies.

The agreements state that, “The contractor shall submit to the minister for approval, in accordance with the Accounting Procedures, a Budget of the Costs to be incurred in implementation of each Work Programme, simultaneously with the submission of such Work Programmes. The minister will decide on the proposal of Budgets simultaneously with the approval of the corresponding Work Programme.”

Such powers are not enshrined in the Stabroek Block PSA or any other existing PSA. Equally important is the insertion of a new provision that ensures the country is not left on the hook for any of the oil companies’ bills. That clause speaks to indemnification.

Among other things Article 30.2 it says: “The contractor shall indemnify, defend, and hold the minister and Government of Guyana harmless against all claims, losses and damages of any nature whatsoever by any personnel of the contractor or of any subcontractor for the loss or damage to personal property or injury or death to Persons caused by or resulting from any petroleum operations conducted by or on behalf of the contractor under this agreement or any License issued pursuant to the Act.”

On the issue of insurance, the draft contracts state that the oil companies must have in place, policies that cover pollution caused in the course of petroleum operations for which the contractor may be held responsible. The agreements also state that, “At the minister’s discretion the contractor may be permitted to self-insure all or part of the aforementioned insurances.” The ability of oil companies to self-insure, that is, to rely on their own fiscal resources, is also part of the Stabroek Block PSA and was highly criticized for years.

A new arrangement or demand rather, is that oil companies must also ensure their subcontractors have adequate insurance coverage too.

Importantly, the draft agreements state that oil companies will not be allowed to acquire the blocks and sit on their hands for decades. The draft documents categorically state that, “If in any phase of the Exploration Period, the contractor does not fulfill its obligations in respect of the Minimum Exploration Work Programme for that exploration period, the contractor is obliged to pay the Government an amount equal to the difference between the minimum expenditure obligation specified for that phase of the exploration period and the actual amounts expended on the work commitments carried out.”

In the Stabroek Block PSA or in other existing agreements, no such penalty is in place. In terms of the field development plans for a commercial discovery, the documents outline a stringent suite of international best practices that must be followed during the preparation of the document. These guidelines are now public- a stark contrast to what was obtained before, thereby increasing the level of transparency on such plans.

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• APNU Executive member, Economic and Youth Policy Advisor, Elson Low, Mervyn Williams, PSA

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