‘New oil PSA repeats major weaknesses in old contract’- Chris Ram

Mar 27, 2023 News

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– urges public forum for broad-based consultations 

Kaieteur News – Amid calls from the Opposition and other stakeholders for an extension in the time for scrutiny of the new model Production Sharing Agreement released by government recently, Chartered Accountant, Christopher Ram said there should be a public forum for broad and general consultations.

Writing in his weekly Oil and Gas column in the Stabroek News last Friday, Ram mocked the new agreement which he said retains the old foreign exchange framework. “So much for a progressive, nationalistic model promised by the Government. While I intend to address the Model over the coming weeks, I urge the Government not only to extend the 14-day consultation period but to engage the public in a public forum for broad, general consultations. The draft does have some positive features but repeats some of the major weaknesses of the existing regime,” Ram said.

Meanwhile, only last week this newspaper reported that the Government of Guyana (GoG) has so far ignored the calls from both civil society and the Opposition for the review period on the new draft Production Sharing Agreements (PSA) to be extended. Two drafts, for the deep and shallow water areas, were released two Tuesdays ago marking the commencement of a 14-day consultation. Several members of the public had recommended that the consultation period be extended to cater for a thorough review of the agreements.

This newspaper had reached out to Minister of Natural Resources, Vickram Bharrat on Friday for his position on the calls being made, but received no response. However, Stakeholder Coordinator for the Ministry, Ms. Mikaila Prince had explained, “no change to the timeline has been communicated.” The Opposition at its weekly press conference last week said the contracts should be laid in the National Assembly and be put before a special select committee that allows for the involvement of the Guyanese citizenry in the national conversation. Similarly, environment and democracy advocate, Simone Mangal-Joly in a letter to Natural Resources Minister, Vickram Bharrat underlined the need for an extension to the consultation period.

She said, “Unlike government officials, citizens are not paid employees of the State and can only read such documents during their after-work hours. Fourteen days is also prohibitive when it comes to procuring qualified specialists to provide advice so that citizens and civil society organisations can make informed representation to government.”

Mangal-Joly had also suggested among other things that mechanisms be put in place for all comments on the new draft agreements be made public and for government to produce a plan to report on how public feedback was addressed in the development of the final model agreement. Alfred Bhulai had also made a similar request to the administration. The agreements that will govern the 14 oil blocks presently on auction, has significantly improved terms for the country. In the new oil contract, government has preserved the right to review and approve the budgets for the exploration and development programmes of the oil companies. 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. 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. Unlike what obtains in the Stabroek Block PSA, the new draft agreements stipulate that the “contractor, affiliated companies, sub-contractors and individuals who are expatriates shall be subject to the income tax laws of Guyana, including, the Income Tax Act of Guyana (Cap. 81:01) and the Corporation Tax Act of Guyana (Cap. 81:03) and shall separately comply with the requirements of those laws, in particular with respect to filing returns, assessment of tax, and keeping and showing of books and records.” The new PSA has proposed that cost recovery be capped at 65 percent and introduces an increased royalty of 10 percent. In announcing the release of the new model contracts, the Natural Resources Ministry explained that to ensure new investments are governed by a comprehensive framework of international best practices, there will be an overhaul of the 1986 Petroleum Act and Regulations.

 

 

 

 

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• agreement, Christopher Ram, Government, Minister of Natural Resources, organisations, stakeholders, Vickram Bharrat

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