Demerara Waves Online News- Guyana Riding on the Crest of Truth
Last Updated on Tuesday, 8 August 2023, 16:18 by Denis Chabrol
ExxonMobil will be asked for greater share in new production from 2030
Mr David Patterson
The parliamentary opposition A Partnership for National Unity+Alliance For Change (APNU+AFC) is proposing a series of amendments to Guyana’s draft Petroleum Activities law that, if approved, will guarantee a fixed royalty rate of 10 to 15 percent and a production share of 60-40 percent.
Currently, the royalty on oil produced is 2 percent and the production sharing is 75 percent cost oil and 25 percent cost oil, with both ExxonMobil and Guyana getting 12.5 percent each from cost oil.
Shadow Minister of Natural Resources, David Patterson told Demerara Waves Online News that he intends to move a motion on the floor during debate and consideration of the Bill for an amendment to include his proposed range of not lower than 60-40 and not higher than 70-30- percent production share. Noting that there is no mention of actual figures in the proposed Petroleum Activities Bill, he said, “clearly the intention is to negotiate themselves without parliamentary scrutiny.”
He explained that the main difference in using 60% is that the operator would take a longer time to recoup its capital costs, which means that the operator could only retain 60% of the oil produced towards repayment
Vice President Bharrat Jagdeo, who is responsible for oil sector policy, had said last November that the new Production Sharing Agreement (PSA) would provide for profit oil to be increased from 25 percent to a maximum of 35 percent, royalty would be hiked from 2 percent to 10 percent and there would be a 10 percent corporate tax.
Another of the amendments dispatched to the National Assembly by Mr Patterson will, if accepted, block operators from recouping their exploration costs by restricting comingling exploration with production costs. “A strict separation shall be maintained between exploration and production activities, costs, and revenues. No revenue from production activities can be charged to exploration activities,” the proposed amendment states.
The APNU+AFC’s amendments also includes a new provision, Clause 99, which calls for ExxonMobil to abide by the new PSA in new productions from January 1, 2030. “We said that from the passing of this Act, whatever any of these operators have, continues but after that any new licence would comes under this Act so in,” he said. Mr Patterson said the intent of such an explanation is to strike a “middle ground” between ExxonMobil’s pioneering role as a risk taker, its future production plans and the need for Guyana to earn more revenues.
“They should not be able to use the same 2016 Production Sharing Agreement for everything so whatever they are to recover they should continue recovering until 2030. Anything after that falls under the new regime and we think that’s a fair and decent proposal for them,” he said.
ExxonMobil has made at least 34 discoveries offshore Guyana.
The APNU+AFC is also proposing that the oil sector be governed by a petroleum commission rather than leaving key decisions to the subject minister. Such a commission, for which a Bill had been long tabled in the National Assembly, should consider all petroleum exploration license applications and send them with technical recommendations to the minister.
The coalition says the Petroleum Activities Bill should empower the National Assembly to approve a ministerial report on the conditions and terms of license arising out of special direct negotiations in keeping with global transparency rules such as those enshrined in the Extractive Industries Transparency Initiative regime. “Should the Cabinet grant the Minister approval to conduct direct negotiations, the Minister is required to seek the approval of the National Assembly before issuing the license,” the opposition explains.
Other proposed amendments, if approved, will provide for an increase in funding for training by oil companies from US$300,000 annually to US$1.5 million annually per well; establish a fixed timeline of nine months for the completion of Audits – the timeline is similar to that as
prescribed in the Audit Act, with regards to Annual Reports, and a seven-year time limit on which a licensee can retain a potential
commercial discovery.
The amendments were seconded by Deonarine Ramsaroop who, like Mr Patterson, is an AFC member. “Transparency and accountability is the overall genesis of the proposals that have been put in,” Mr Patterson added.