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VP Jagdeo dismisses Exxon’s concerns about Govt.’s ability to regulate new oil deals
Kaieteur News – Vice President, Bharrat Jagdeo recently dismissed concerns raised by ExxonMobil Guyana’s Country Manager, Alistair Routledge that the Ministry of Natural Resources lacks the capacity to fulfill many of the new roles enshrined in the new Production Sharing Agreements (PSAs) for shallow and deepwater blocks.
ExxonMobil Guyana Head, Alistair Routledge
At a press conference held on October 17, 2023, Routledge referenced the overall concerns of industry stakeholders on the concentration of exceptional powers in the hands of the minister over the oil sector. Additionally, he had said, “…there are a lot of approvals required under the new PSAs and quite honestly, to date, I don’t think the ministry is set up to process, review and exercise those, even if they were the right authority to do that.”
At a subsequent media briefing, Jagdeo said the government is already making efforts to beef up its capacity to not only fulfill many of its new responsibilities but to also do better contract policing. The Vice President also rejected the implied impression that Guyana must only craft laws or new contracts in a manner that addresses its capacity constraints at the time. The official said this is short-sighted approach “and we don’t subscribe to that at all.”
Jagdeo said Guyana’s new PSAs are armed with world class provisions, reiterating that the government will build the capacity to ensure all are complied with. “So if they are required to submit data on time then he shouldn’t worry too much about our capacity to process that data…,” Jagdeo said.
The Vice President was also keen to note that the Guyana Government received international support from IHS Markit during the crafting of the core provisions of the new PSAs as well as the Petroleum Activities Bill passed in August, 2023. Along with ensuring that the fiscal provisions were strengthened in new oil contracts, Jagdeo said IHS recommended that the country tighten its arrangements for the relinquishment of blocks.
Vice President, Dr. Bharrat Jagdeo
In the model PSA that will govern shallow water blocks, it states that the exploration period shall not exceed five years. Within the first three years of the licence, companies will have to conduct a work programme approved by government. Upon fulfilling those responsibilities, the company will have the option to renew its licence to complete the remaining two years of exploration. The consequence of this renewal is that the company would have to return 50 percent of the block to the State.
In the model PSA for deepwater blocks, it states that an exploration licence will last for 10 years. After the first three years of working on the block, the oil company would have completed the first phase of the licence and would have to renew it, should it wish to enter the second phase lasting for another three years. The consequence of that renewal is that the company would have to return 50 percent of the block to the State. Upon completing the second phase, if the company wishes to advance to the third stage of the licence lasting for two years, it may do so only after relinquishing another 50 percent of the existing block.
If it wishes to apply to use the remaining two years on the licence then it would have to relinquish another 50 percent of the block. Routledge questioned the reasonableness of these timeframes, alluding that it could be difficult for companies to execute contracts to acquire data on the respective blocks, process it and make decisions about the next phase which includes drilling. Jagdeo noted however that the terms are not onerous and are in keeping with the global norm to allow for the effective management of the sector. “I am not saying the PSA is hard and fast and nothing or minor things when we get to the contracting stage won’t change but the core terms won’t change. We won’t weaken the PSA to suit Exxon…,” the Vice President said.
- Alistair Routledge, Dr. Bharrat Jagdeo, ExxonMobil Guyana Head, Production Sharing Agreements (PSAs), Vice President
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