Latest update February 4th, 2025 9:06 AM
Taxes recoverable in Govt.’s new draft PSA
Kaieteur News – The Government of Guyana, intent on amending the lopsided 2016 oil deal inked with ExxonMobil has drafted two new model contracts that will govern the 14 oil blocks presently on auction.
Article 38.2 of the draft contracts state that “…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.”
Although oil companies and their affiliates will now be subjected to the country’s tax laws, a daunting provision included in the new model contracts allow for these payments to be recovered through cost oil. To add insult to the injury, the new model agreements for the Deep and Shallow Water oil blocks stipulate that the recovery of these payments can be done even without the Minister’s approval.
The cover of the new model PSA for the Deepwater Blocks
Annex ‘C’ of the Deepwater model agreement, at Section Three, which addresses costs that can be recovered without the approval of the Minister states at 3.1 (f) “All rentals, taxes, levies, charges, fees, contributions and any other assessments and charges levied by the Government in connection with the Petroleum Operations and paid directly by the Contractor,” are all recoverable contract costs.
The same provision is set out in the Shallow Water draft agreement in Annex ‘C’ Section 3.1 (f).
The Government of Guyana on Tuesday closed its two weeks public consultation on the new draft Production Sharing Agreements (PSAs) for deep and shallow water blocks offshore.
ExxonMobil is exempted from paying any taxes under the Stabroek Block contract; an arrangement the People’s Progressive Party (PPP) government publicly committed to amend.
Upon the release of the new model agreements on March 14, 2023 the Ministry of Natural Resources also commenced a 14 days consultation period for citizens send their feedback.
Several Guyanese had requested that the timeline be extended while others made suggestions for all comments to the draft contracts be made public. It was also recommended that mechanisms be instituted to allow for the changes to the drafts to be highlighted.
It was explained, “The draft Model Petroleum Agreements embodies rigorous research and analysis by the ministry’s internal team, and external consultants on all topics relevant to a modern petroleum agreement for Guyana. The process involved a comprehensive assessment of the current petroleum agreement and the identification of best practices relevant to every contractual aspect of a modern agreement grounded in the Guyana context.”
The Ministry said to ensure new investments are governed by a comprehensive framework of international best practices, the Model Petroleum Agreements will be followed by an overhaul of the 1986 Petroleum Act and Regulations.
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