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No need for PSA to block oil companies from recovering royalty – Govt.
…says “it is widely understood” that royalty cannot be recovered
(Kaieteur News) – The Ministry of Natural Resources (MNR) has defended the new oil contract signed with Total Energies and partners, insisting that there is no need for the deal to explicitly block the companies from recovering royalty payments made to the Government of Guyana (GoG).
Minister of Natural Resources, Vickram Bharrat
In a statement to the media on Friday evening, the ministry explained, “Recoverable contract costs are those expenses incurred in carrying out petroleum operations and can only be recovered from cost oil. This recoverable cost is deducted from the value of crude oil and/or natural gas produced and sold from the contract area.”
The ministry was responding to an article published by Kaieteur News on November 21, 2025 where it was reported that the new oil deal mirrors the mistake made in the Exxon contract with regard to royalty.
MNR however pointed out that Petroleum Operations is defined in the Petroleum Activities Act of 2023 as “exploration operations, appraisal, development and production operations or any combination of two or more of such operations, including construction, operation and maintenance of all necessary facilities, plugging and abandonment of wells, safety, environmental protection, transportation, storage, sale or disposition of petroleum to the delivery point, site restoration and any or all other incidental operations or activities as may be necessary and required”.
As such, MNR reasoned, “The fundamental reason why royalty is not recoverable is that it is a payment based on production, rather than on profits. Royalties are paid before the allocation of production between Cost Oil and Profit Oil, which excludes royalty payments from being considered recoverable costs…as such, unless expressly included in the Petroleum Agreement, royalty payments cannot be recovered as part of the Contractor’s costs.”
Notably, government argued that royalty cannot be considered recoverable under standard provisions.
It referenced the previous PSA signed with ExxonMobil for the Stabroek Block which also initially lacked a provision to explicitly block companies from recovering royalty. This arrangement was later addressed by former President David Granger in an Addendum to the Stabroek Block PSA.
According to the ministry, “In the context of Guyana’s recent oil production history, it’s worth noting that in 2019, as the country was new to petroleum production, there was some uncertainty surrounding the status of royalty payments and their recoverability.”
Since then, government claimed it has amassed experience in oil and gas operations and the status of royalty payments has become clear. “It is now understood that royalty payments are not recoverable unless expressly stated otherwise in the agreement,” MNR noted.
Government said, “In the petroleum industry, it is widely understood that royalty payments on petroleum produced and sold are generally not cost recoverable. The exception to this rule occurs only in petroleum agreements, where the cost recovery of royalty payments is explicitly stated.”
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