New draft oil law to be released on Monday

Jun 16, 2023 ExxonMobil, News, Oil & Gas

…model PSAs being finalised – VP Jagdeo

Kaieteur News – Guyana’s Petroleum (Exploration and Production) Act of 1986 has finally been updated and a draft, completed by the People’s Progressive Party Government will be released next Monday for public consultations.

Vice President Bharrat Jagdeo made the disclosure on Thursday during a press conference at Freedom House in Georgetown. Along with this critical piece of legislation to govern Guyana’s oil sector, the new model Production Sharing Agreements (PSAs) for both the Deep and Shallow Water Blocks are also in the final stages.

Vice President, Bharrat Jagdeo

According to Jagdeo: “we are hoping by Monday, the draft Petroleum Act will be put out for public consultation.” Jagdeo told members of the press that he met with the Minister of Natural Resources, Vickram Bharrat and his staff only on Wednesday where discussions were had concerning the draft oil law. “We are aiming for Monday next for the draft Petroleum Act to be made public for views, consultation, etcetera.”

With regard the contracts to govern future oil production areas in Guyana, the Vice President explained that the comments received by the administration have already been added to the drafts. The model agreements were released on March 14, 2023, triggering a two-week public consultation and review period. “The PSA, we have two models incorporating all the comments…so it’s now for another policy review and I will finalise it because we’ve already gotten comments from everyone,” Jagdeo said. Even though the Opposition had opted to share its comments on the new PSAs at “an appropriate time” the party is yet to submit its views.

While the Government of Guyana has been pushing ExxonMobil Guyana to accelerate its exploration and production of the country’s oil and gas resources, the country has been operating with archaic petroleum laws.

Government said it is seeking to modernise its legal and regulatory framework as it relates to the petroleum sector, to address issues such as oil revenue management, licensing, Production Sharing Agreement models, local content, and Health, Safety, Environmental and Security (HSES) management. It said the result would be maximising the economic benefits to the country, an improved management of the technical, environmental, social and financial risks linked to the sector and building capacity to engage effectively with investors.

The Petroleum Act was enacted when the country was not a petroleum producer. This has sparked the grave need for the modernisation of the law.

Meanwhile, the PSA signed with oil major ExxonMobil has been frequently described as the World’s worst oil contract. The deal secures a mere two percent royalty and allows Exxon to deduct 75 percent of the earnings towards cost recovery. The remaining 25 percent is then shared equally between the government and the company. The contract which governs Guyana’s largest oil reserve, the Stabroek Block also does not feature a ring-fencing provision to allow each oil project to pay for itself. Importantly, government also waived the need for the company to pay any taxes to the country on the multibillion-dollar sector. The agreement also features other lopsided terms that have triggered a series of protest action in the country since it was first made public.

It was reported that government will be seeking a 10 percent royalty and 10 percent corporate tax in the new model PSAs, while cost recovery will be capped at 65 percent. Other aspects of the contract governing the management and oversight of the oil operations have also been significantly improved. See link below for more.