House approves new oil law arming minister with super powers over multi-billion dollar industry  

Aug 11, 2023 ExxonMobil, News, Oil & Gas

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By Kiana Wilburg

Kaieteur News – Guyanese lawmakers on Thursday morning approved the Petroleum Activities Bill, supplanting the decades-old Petroleum (Exploration and Production) Act of 1986.

Presented to the House by Natural Resources Minister, Vickram Bharrat, this pivotal legislation, once given the presidential assent, will bestow upon him significant authority over a spectrum of activities related to petroleum — from exploration and production to transportation and storage, encompassing even the geological storage of carbon dioxide.

Bharrat said, “This Bill seeks to strengthen the current system we have in place, bringing more transparency and accountability to the sector as well as new capturing dimensions not contemplated in the old law and bringing those aspects under proper management…”

He said too that the Bill gives the minister the power to grant geological and geophysical survey permits such as those that would be needed for the Gas-to-Energy Project. He lauded the Bill as being a comprehensive document that touches on several aspects of the growing industry.

During his contributions to the Bill, Shadow Minister for Oil and Gas, David Patterson called for critical amendments to the draft law such as provisions which require the creation of a Petroleum Commission to provide independent oversight for the industry.

Though he also called for royalty to be as high as 15 percent and for full liability coverage for oil spills, his focus was on a commission that would help to insulate the industry from undue political influence. In its current structure, Patterson said, “This law proposes to make the minister the newly appointed emperor over all things oil in this country.”

Patterson’s call for a Petroleum Commission was also supported by his colleagues AFC Leader, Kehmraj Ramjattan and Opposition Leader, Aubrey Norton.

Norton during his remarks said, “…We are not saying the minister shouldn’t have responsibility for the sector but that doesn’t mean you cannot have a commission that is independent and insulates the sector from political partisanship and we need to do that.  Why don’t you want to do it now when you were an advocate for it when we (APNU+AFC) were in government?”

Norton then contended that the Bill offers lawmakers an opportunity to demonstrate the maturity of the legislative branch to produce for the people, one of the best laws that protect their interest in a sector that is now the largest revenue earner.

He said, “…I wish to warn that we are a small nation, and when there is too much discretion in one person’s hands as opposed to clear and unavoidable laws then the big and powerful multinational corporations can take advantage of us.”

Attorney General and Minister of Legal Affairs, Anil Nandlall expressed strong disagreement with the perspectives offered by his opposition colleagues. He said drafters did not produce the Bill in isolation but did so after consultations with the USA, the UK, Norway, Ghana, Ireland, Angola, Brazil, and Trinidad and Tobago.

He said, “In Trinidad and Tobago… no one can dispute that it has had a successful model as a production centre for 100 years. They have all the powers vested in the minister of energy. And for 100 years, the sky did not fall.”

Nandall said it is the prerogative of the Executive to repose powers in an elected official instead of a non-elected official.

“This Executive has chosen the model where the powers fall with the minister and we stand and fall by that. We included in the Bill that for exceptional decisions he (the minister) has to consult with Cabinet and Cabinet is collectively accountable to parliament and that is what makes us a democracy.

“We are holding ourselves out as being accountable because you cannot hold non-elected people (appointed to a Petroleum Commission) accountable,” the Attorney General said.

Other speakers on the Bill included Minister within the Ministry of Public Works, Deodat Indar; Minister of Labour, Joseph Hamilton; Home Affairs Minister, Robeson Benn; Culture, Youth, and Sport Minister, Charles Ramson; and Opposition Members, Deonarine Ramsaroop, Vincent Henry, Ganesh Mahipaul, and Dawn Hastings- Williams.

After rejecting the opposition’s amendments, the House then passed the Bill as is.

OTHER KEY PROVISIONS

The Petroleum Activities Bill includes several provisions which state that the minister can delegate some of his powers/duties to an agency. Be that as it may, he can revoke those delegations at any time. He is also allowed to review and apply any variations he deems necessary to decisions made by his appointees.

With respect to revenues, the new law states that the holder of a petroleum exploration licence shall or a petroleum agreement must pay annually to the State a rental for area. This amount has already been specified to be US$1M annually.

The Petroleum Activities Bill also paves the way for oil companies to pay a signature bonus to the State upon receipt of a petroleum exploration licence. Where a licence is granted through competitive tender the minimum value of the signature bonus shall be established in a notice by the minister. As part of Guyana’s first oil blocks auction set to conclude in the fourth quarter of 2023, this is set at a minimum of US$10M for shallow water blocks and US$20M for deepwater concessions.

Where a petroleum exploration licence is granted through direct negotiation, the value of the bonus is the amount resulting from the negotiation process. The law also states that signature bonus shall not be cost recoverable.

The law states that if a company wishes to hold onto a discovery that it is not making an immediate use of then an annual retention fee would apply.

The law also states that the holder of a petroleum production licence shall pay to the State, royalty in respect of the gross petroleum produced in the production area. This is currently set at a rate of 10 percent. Failure to pay can see an interest rate of six percent per annum being applied.

Additionally, a petroleum exploration, petroleum production licence, or petroleum agreement shall provide for the annual payment of a training fee during the period of the licence or petroleum agreement. The law explicitly states that, “The training fee shall not be cost recoverable.”

A petroleum exploration licence, petroleum production licence or petroleum agreement may also require a licensee to establish a programme of financial support for environmental, social and other projects to be funded by the licensee, which shall not be cost recoverable.

Furthermore, the Minister assigned responsibility for finance may, by resolution of the National Assembly, direct the Income Tax Act, the Value Added Tax Act and Corporation Tax Act shall apply to, or in relation to, a licensee subject to such modifications and qualifications as may be specified in the order. The licensee would however be exempted from the Property Tax Act; and the Capital Gains Tax Act.

 

Notably this Bill will only apply to ExxonMobil from a management and administrative perspective. The oil giant is insulated from all new fiscal terms previously outlined which also include a 10 percent royalty, the payment of property tax from 0 to 7.5 percent, and a 10 percent income tax payment.

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• Kiana Wilburg, Natural Resources Minister, Petroleum Activities Bill, super powers, supplanting, Vickram Bharrat

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