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Jagdeo says new fiscal regime will be in place for gas resources
Kaieteur News – Vice President Dr. Bharrat Jagdeo said recently that the production of Guyana’s natural gas resource will be governed by a different fiscal regime than the generic terms of the Stabroek block production sharing agreement (PSA). These terms have been widely condemned for being lopsided and unfavourable to Guyana.
Vice President, Bharrat Jagdeo
During his Thursday press conference at Freedom House, the Vice President said, “We want to monetize the gas in the country. The gas will be monetized under a different fiscal regime… And this can only bring greater benefits and more revenue to the country.”
He added, “… Right now, Exxon does not want to monetize the gas. It prefers to inject the gas into the wells, claiming that it will help to maintain the quality of the reservoirs. It does not want to monetize the gas. We, on the other hand, we believe that there is great value to the country and to our people by monetizing this gas.
“We can get billions of dollars more of revenue from the wells, rather than it being re-injected. And gas is now universally recognized as a transitional fuel.”
It should be noted that the Stabroek PSA’s non-associated gas clause gives ExxonMobil and its partners the leverage to request renegotiation of terms if they deem it necessary for commercial viability. Should this provision be invoked, the government would be obligated to come to the negotiation table to grant more favourable terms to the companies. This has the potential to exacerbate the present inequities of the Stabroek Block deal.
The current terms, applied for oil projects, favour oil companies like ExxonMobil, Hess, and CNOOC. The current contract conditions, including a 2% royalty rate, a 75% cap on cost recovery, and a 50-50 profit-sharing model, along with tax waivers, have faced extensive criticism.
A particularly contentious aspect is the contract’s stability clause, which significantly limits Guyana’s ability to renegotiate for better financial terms.
The government, instead of pursuing better terms for Guyana, is focused on developing a national gas strategy to set out a roadmap for developing the gas reserves.
With an estimated 17 trillion cubic feet of natural gas in the Stabroek Block, ExxonMobil is gradually shifting attention to gas, as evidenced by recent drilling activities.
Jagdeo has said that if ExxonMobil does not actively work towards monetizing these gas reserves, Guyana might request the relinquishment of the blocks. This would allow the government to explore partnerships with other interested entities.
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