Guyana wholly unprepared for regulating oil sector – Attorney-at-Law Datadin

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First oil is just around the corner, and according to one prominent lawyer, Guyana’s legislative framework is still woefully inadequate to regulate a sector that is expected to dwarf the traditional sectors in revenue.

During a Nations School of Business and Management- facilitated seminar on oil and gas on Sunday, Attorney-at-Law Sanjeev Datadin noted that Guyana is behind in its preparations to regulate the oil and gas sector compared to other countries.
This is a criticism the coalition Government has periodically faced.

Since oil was discovered by ExxonMobil in the Stabroek block in 2015, just one piece of legislation specifically for the oil and gas sector has been completed and assented to; and that is the Natural Resources Fund Bill.

Participants at the seminar on Sunday

“Look at it this way,” Datadin explained. “If we take England, England has had at least 3,000 pages of legislation. That was the basics. Then they had subsidiary legislation. That was probably another 10,000. At present, we have 60 pages.
“Now, I understand the whole argument of quality, quantity and all the rest. But we have a petroleum Act which is from the 1930s. And then we have the (1986) Act. The 1930s one was when the first sort of exploration first took place,” Datadin explained.

According to Datadin, little has been done to regulate the sector until the passage of this Act. He noted the steps other countries have taken to protect their resources and people. For instance, in Trinidad, foreign oil companies are limited in their ownership of land.

“Nothing else has happened, until (1986) when we passed the Petroleum Act. Now, that Act really only provides for licensing, how you issue licences; it has nothing to do with the myriad of issues you have to deal with,” he explained.
“We have a ‘production agreement’. Now, these things have to be regulated. Countries have put in their legislation what can and cannot be in the contract. They have put in the legislation everything you must have and cannot have, and they have made it law,” he explained.

The attorney explained that this protects countries and individual Ministers from being corrupted, as there are legislative limits to what concessions they can agree to give to an oil company.

“If an oil company comes and has a one-on-one meeting with the Department of Energy or a Minister in charge, they can’t influence them to give them a better deal. Which means the opportunity for corruption is drastically reduced. I believe that’s the only way to protect fragile territories like ours,” he said.

“If we can’t agree to royalties (of) less than seven per cent, then two per cent would have never happened,” Datadin said as an example. “We like to say that every time there’s a bad deal there’s usually a (saying) that someone was paid. That may or may not be true, but these companies have budgets larger than our country, and you have to understand what economic pressure is.”

Regulation

After its 10th discovery of oil in the Stabroek Block, ExxonMobil estimated the recoverable resource in the block to be 5 billion oil equivalent barrels. At US$50 a barrel, that equates to well over US$200 billion.

Exxon has since found oil in two other wells. In addition, an independent assessment, or competent persons report, had found that 2.9 billion barrels of oil exist in the Orinduik block.

All of this will represent a monetary windfall for Guyana, which will be saved and invested through a Natural Resources Fund.

Previously, a green paper on the fund was laid in the National Assembly. Government released the draft Natural Resources Fund Bill of 2018, which had, among other things, proposed the creation of a 22-member Public Accountability and Oversight Committee that would oversee the management of the fund and provide checks and balances.

President David Granger assented to this bill on January 23, 2019. The Stabroek Block is 6.6 million acres (26,800 square kilometres). Esso Exploration and Production Guyana Limited is the operator, and holds a 45 per cent interest in the Stabroek Block.

Hess Guyana Exploration Ltd. holds a 30 per cent interest, and CNOOC Nexen Petroleum Guyana Limited holds a 25 per cent interest.

A contract was inked on October 7, 2016 between the coalition Government and ExxonMobil and its partners in the Stabroek block. In the renegotiated contract, Guyana agreed to a two per cent royalty for every barrel of oil, a 50 per cent share of profit oil, and a US$18 million signing bonus.

Out of the contract, Guyana also secured the company’s agreement to set up a fund for social and environmental projects. Exxon has to contribute US$300,000 per year to this fund. The sums roll over, and the company together with Government will determine which projects to fund.

The contract sets aside another US$300,000 per year to ensure Guyanese personnel are trained at local or overseas universities and conferences.

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