Guyanese had enough time with 14 days to scrutinise new oil contracts – Jagdeo

Apr 06, 2023 News

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By Kiana Wilburg

Kaieteur News – Vice President, Bharrat Jagdeo has confirmed there will be no extension of time for stakeholders to review the provisions of the draft Model Production Sharing Agreements (PSAs) for deepwater and shallow water oil blocks.

The chief policymaker for the nation’s oil sector said 14 days to review the document is enough time. On the sidelines of a Local Content Summit on Tuesday he said, “We have had quite a few comments from a large number of people (on the draft documents but) I find it strange that this matter has been in the public domain for the last five years about what’s wrong with the current PSA and so people have been saying that two weeks is not enough.”

The Vice President added, “They knew we were going to put out the draft PSAs. It is a five-year issue …I think it is just another one of those things where people call for more time but they really don’t want to put in the technical effort…Nevertheless we are moving forward.”

Since the release of the documents on March 14, last, the political opposition called for there to be an extension of the timeline for review, adding that it should be sent to the National Assembly for debate. Since making those calls however, it has not said publicly what it agrees, or disagrees with, in the draft documents. It has also not offered an alternative to what it believes ought to be addressed in such agreements.

Be that as it may, Kaieteur News on March 15, 2023, published an extensive review, highlighting some of the key features of both documents.

When compared to the controversial Stabroek Block Production Sharing Agreement (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. At 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.

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• Bharrat Jagdeo, chief policymaker, deepwater, Model Production Sharing Agreements (PSAs), Vice President

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