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Economist flags costly loophole in new PSA
…urges urgent amendment to protect Guyana from potential royalty losses
(Kaieteur News) – To prevent oil companies from paying hundreds of millions in royalty to Guyana with one hand and grabbing it back with the other, an urgent amendment to the 2025 Production Sharing Agreement (PSA) with Total Energies is required, this is the view of Economist, Elson Low. But the government has insisted that there is no need for the oil deal to explicitly block the companies from recovering royalty payments made to the government, noting that in the petroleum industry, it is widely understood that royalty payments on petroleum produced and sold are generally not cost recoverable.
Low, a former advisor to the Leader of the Opposition on Sunday told Kaieteur News that the government’s decision not to explicitly state that royalties are unrecoverable in the newly signed PSA is “extremely reckless”.
Economist, Elson Low
He reasoned that this is due to several considerations, as he reminded that Guyana is currently embroiled in a dispute over the results of an audit of cost recovery expenses. Low pointed out that any ambiguity about the recovery of royalty could lead to yet another prolonged legal battle that could end up costing the state.
Secondly, he explained, “Because the royalty rate is five times higher in the newly signed PSA, this means the risk of loss to the country is much greater if royalties are indeed recovered.” Low was keen to note that it would cost the GoG little or nothing to ensure that this risk is mitigated, especially since the Stabroek block deal was also previously amended to make it clear that oil companies will not be allowed to recover royalties.
He said, “That previous PSAs have been amended to specify royalty cannot be recovered raises the potential legal argument that if the government did not want royalty to be recovered it would have explicitly stated this in the (new) PSA. Thus, that this precedent has been established could lead, of course, to a prolonged dispute.”
The economist warned that these risks could deny the Guyana government hundreds of millions of US-dollars annually. To put this into context, he pointed out, “Even with a production one fifth the size of that in the Stabroek block the same royalty would be due -which amounted to over US$300M in 2024.”
To this end, Low urged, “An urgent amendment to this flaw in the PSA is definitely necessary.”
On Friday, the Ministry of Natural Resources (MNR) said there is no need for the oil deal to explicitly block the companies from recovering royalty payments made to the government. 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. 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.”
Total Energies, a French oil giant, in partnership with QatarEnergy, and Petronas of Malaysia was awarded a shallow water block by the GoG following its participation in the 2022-launched Oil Blocks Auction. Block S4 spans an area of approximately 1,788 square kilometres, located 50 to 100 kilometres off Guyana’s coast in water depths ranging between 30 and 100 metres. The French company leads the consortium with a 40% interest in the block, along with its partners, Qatar Energy and Petronas with 35% and 25% respectively. The companies inked an Exploration License and Petroleum Agreement with the GoG on November 10, 2025. Total will commence exploration activity in the latter half of 2026. If commercial resources are discovered, the operator will move to production activities.
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