Latest update December 16th, 2024 9:00 AM
Oil companies request to defer royalty to be approved by Cabinet – VP Jagdeo
Kaieteur News – The draft Petroleum Activities Bill has proposed granting the Minister of Natural Resources, Vickram Bharrat, the power to waive or defer royalty payments to the State, by oil and gas operators; however, Vice President Bharrat Jagdeo has acknowledged that this may be an opening for mismanagement.
Vice President, Bharrat Jagdeo
During a press conference on Thursday hosted at the Office of the President, Jagdeo said the government is examining whether the draft legislation can be strengthened to allow any decision regarding the royalty payments to be approved by Cabinet, rather than be authorized by the subject Minister.
The former Head-of-State said this is particularly important to avoid rehashing the mistake made by the former Coalition government, where the then Minister responsible for Natural Resources entered into what is now known as the world’s worst Petroleum agreement, without first consulting his Cabinet colleagues.
According to the draft Bill, currently in the consultative phase, royalties owed to the state can be waived or deferred by the Minister, after discussions with the Minister of Finance.
The draft Bill states at Section 49 (1), “The Minister may, on application made to him by a licensee and after consultation with the Minister assigned responsibility for finance, by order— (a) remit, in whole or in part, any royalty payable by the applicant, or (b) defer payment of any royalty, on such conditions (if any) as he may specify in the order.”
In responding to concerns from the press on the matter, the Vice President explained, “The first draft has the Minister, we are looking at seeing if we can’t strengthen that (so) that only the Cabinet could (waive the payments), so the Minister has to have the approval of the entire Cabinet if there should arise any situation where they can defer the royalty or like reduce the royalty.”
He explained that under a circumstance where the operator suffers a loss during production activities, he may make an application to defer the payment. “For example, Liza One, we need now the gas to run our power plant- supply of power- but (if) the oil prices fall to $20 a barrel and the cost of production is $25 a barrel…loss making situation and then on top of the $20, you have to pay the royalties too, the two percent royalty. So, our aim is to keep the well going so that we can get the gas for power supply so in a situation like that, that is how it could be exercised,” the VP noted.
Jagdeo added that Guyanese now have the opportunity to give their views on this issue and other areas of the Bill that is now publicly available. In fact, he urged citizens not to be “as lazy as the Opposition” but to read the proposed legislation and send their feedback.
The draft Bill is now available on the following websites: www.nre.gov.gy and www.petroluem.gov.gy. All comments should be sent via email to [email protected].
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