The fact that Guyana, despite its inexperience, has been able to implement policies to govern the oil and gas sector that some of the more experienced countries have not put in place, is down to Guyana shortening its learning curve by learning from the good and the bad examples.
This is according to President Dr. Irfaan Ali, during a press conference while on an outreach to Region Three (Essequibo Islands/West Demerara). Responding to questions from the media, President Ali chided those who fixate on the negative examples of oil and gas production, as opposed to the positive one.
“The capability has to be built. But a lot of people who talk about what we do here, they will come to me and say in the same breath, look at the transformation in Dubai, in Kuwait, in UAE, in the United States. Major supplier of natural gas now. They will use all these examples. In Kazakhstan, in Norway. There are hundreds of positive examples out there. That can show what oil and gas can do for the transformation of a country.”
“But there are also a lot of negative examples… and most times, 99 per cent of the times, you (sections of the media) go for the negative examples. You go for the failure. You can choose the failure or the success. There are many success stories that you can use as examples, why don’t we grab on to them?” the President questioned.
President Ali further assured that efforts are being made by the People’s Progressive Party/Civic (PPP/C) to plan for any eventuality, including the ill effects of oil and gas. But he urged persons to look at Guyana’s current progress in planning for the sector, despite its relatively inexperience.
“We have to plan for any eventuality. I support that. We are very young in this industry. But many sophisticated jurisdictions and countries, who are in this industry for 50, 60, 100 years, have not accomplished what we’ve accomplished. Because what are we doing? We’re shortening the learning curve. By looking at the worst and best practices and ensuring that we put into system a functional policy. That would allow the growth, but also the safeguard,” President Ali said.
“It’s the balance. In life you have to find the balance. The most important element in life for success is balance. Similarly for the country. When you’re making policies, the policies must be balanced to attract investment but at the same time, ensure consumer rights are protected. Protect the environment, but ensure investments are protected. Ensuring balance is an important part.”
The Government recently had cause to defend its management of the oil and gas sector since 2020, with the Ministry of Natural Resources pointing out the various legislative and policy advances, both completed and planned, some of which have corrected mis-steps by the previous A Partnership for National Unity/Alliance For Change (APNU/AFC) Government.
Among the advances the government has made since coming to office in 2020, is passing the Local Content Act and setting up the Local Content secretariat. Other advances are new environmental permit conditions and fees, as well as setting up a Natural Resource Fund (NRF) with robust legislation governing its use and safeguards against non-disclosure of incoming revenue.
According to the Government, they were also able to update the principles and conditions of all new petroleum production licenses, with the completion of draft model Production Sharing Agreements (PSA) for the deep and shallow blocks.
The new PSA includes terms like a 10 per cent royalty rate. This is an increase on the previous 2 per cent in the former Government’s PSA it signed with ExxonMobil. The cost recovery ceiling is now 65 per cent, a decrease from 75 per cent. Companies will for the first time also pay a corporate tax, 10 per cent.
Cost recovery audits were also completed, while continuous review and modernization of the oil and gas legislative framework is planned… including for the 1986 Petroleum and Exploration Act.
Guyana, with US oil giant ExxonMobil as the operator, began producing oil on December 20, 2019, in the Stabroek Block. Guyana’s oil revenues are being held in the Natural Resource Fund (NRF) at the New York Federal Reserve Bank, where it is earning interest.
The oil-rich Stabroek Block, which is producing the oil, is 6.6 million acres (26,800 square kilometres). Exxon, through its local subsidiary Esso Exploration and Production Guyana Limited (EEPGL), is the operator and holds 45 per cent interest in the Block. Hess Guyana Exploration Ltd holds 30 per cent interest, and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds the remaining 25 per cent interest.
