…huge chunk of $200M World Bank funding to be used
Work is expected to start this year on a model Production Sharing Agreement (PSA) that will be different to the PSA ExxonMobil signed with the former Government and ensure that Guyana can get increased benefits from future oil deals.
This is according to Natural Resources Minister Vickram Bharrat, who recently told the National Assembly during the consideration of the budget estimates for the Ministry that part of that money includes a $200 million allocation from a World Bank project.
Opposition Member of Parliament David Patterson had raised questions over whether this allocation was for the gas-to-shore project. Making it clear that it was not, Bharrat explained that some of the money will go towards developing this new model PSA from this year.
“But for now, I can give a breakdown of the $200 million. Mr Chair, $22.4 million is allocated to hiring a law firm to provide regulatory and legislative support. We would have mentioned several times that we intend to have a model PSA, an internationally recognised PSA, that will bring far more fiscal benefits to Guyana and the people of Guyana.”
“Unfortunately, we have not had a discovery in the other blocks of commercial quantities, until recently in the Corentyne Block. So, work will have to begin this year on ensuring we have a model PSA that will bring far more benefits to Guyanese than the Stabroek PSA,” Bharrat said.
Some of the money will meanwhile also go towards updating Guyana’s Petroleum, Exploration and Production Act of 1986 and for the preparation of Guyana’s Extractive Industries Transparency Initiative (EITI) reports.
“Added to that under this very provision, we would have promised to look at the Petroleum, Exploration and Production Act of 1986, which we know definitely needs to be updated. And this provision will start that process,” Minister Bharrat explained.
“Allocated too Mr Speaker, is $38.7 million for the third and fourth reports, the EITI reports. And under this too, we’ve already contracted the independent administrator, the firm, BDO out of the UK, that is responsible for drafting that report. And of course, the Multi Stakeholder Group is the body that will review that report and make the final approval.”
The former A Partnership for National Unity/Alliance For Change (APNU/AFC) coalition Government had come in for heavy criticism over the 2016 PSA it signed with US oil major ExxonMobil. The agreement has been criticised for low royalty – a meagre two per cent, lack of ring-fencing provisions, and cost oil claims that would see Guyana losing billions, among other issues.
While the Government has said that due to the principles of respect for contract sanctity, the PSA could not be renegotiated, it can create a model PSA that is far superior to the current one. Such a model PSA will be important when Guyana has to auction out new or relinquished oil blocks, which have already been de-risked by the plethora of oil finds in the Stabroek Block.
It was explained by Vice President Bharrat Jagdeo last year that the Guyana Government would be activating and enforcing the relinquishment provision in contracts, which speaks to handing over portions of the awarded oil blocks during the course of the exploration period.
Additionally, Jagdeo had signalled his Administration’s intention of auctioning new oil blocks no later than the third quarter of 2022. This would call for the enforcement of the Relinquishment Provision, thereby adding these acreages to the existing pool of blocks to be awarded.
For the Stabroek, Canje and Stabroek Blocks, operators are required to relinquish 20 per cent of their blocks after the first renewal period; while those of the Demerara and Corentyne Blocks are expected to relinquish 15 per cent within this period.
The Kaieteur Block’s relinquishment provision is said to be 25 per cent, then 20 per cent by the first renewal; with the Mahaicony and Roraima Blocks at 25 per cent. By the time of the first renewal for the Orinduik Block, the operators are not expected to relinquish any portion.
