Govt. preserves right to participate in development of oil blocks

Nov 24, 2023 ExxonMobil, News, Oil & Gas

Petroleum Activities Law Pt 10…

Kaieteur News – According to Guyana’s Petroleum Activities Law, any agency of the State, or any company wholly or partially owned by the State shall have the right to acquire on the same terms as those proposed by a licensee, such rights or portion thereof as a licensee proposes to transfer. This provision which allows for the State to participate in the development of oil blocks is critical for several reasons.

Industry experts have informed Kaieteur News that state participation is critical from a financial standpoint. In addition to getting royalties and taxes from an oil company, a state agency can get a greater share of the profits if authorities elect to be a participant in the development and production of the oil. If for example the State elects to have a 20 percent participation interest, it would therefore have access to 20 percent of the revenues. It must also cover 20 percent of the exploration, development and production costs too.

Direct participation also allows a government to have a say in how its natural resources are managed by oil companies. In other words, it allows the administration to have a seat at the discussion table with oil companies. This allows the State to have a say on what costs can be sunk and at what period. It also gives the State an opportunity to scrutinize the costs before they are incurred.

By participating in oil blocks, states can also foster the development of related industries, such as petrochemicals, refining, and downstream activities. This diversification can create jobs and spur economic growth.

Involvement in the oil sector can also lead to the development of local expertise and technology. In fact, collaboration with international oil companies often includes technology transfer and training, which can benefit the local workforce and industry.

Additionally, state participation can ensure that oil extraction activities are conducted responsibly, with due consideration for environmental protection and social welfare. Governments can even enforce regulations to mitigate the negative impacts of oil exploration and production. Overall, state participation in oil blocks can be an effective mechanism in balancing economic benefits, ensuring resource management, and managing environmental concerns.

Blocks, financial, oil, Petroleum Activities Law, State

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