As the government prepares for an auction of more oil blocks in September 2022, the establishment of a National Oil Company remains topical.
On Monday, Vice-President Dr. Bharrat Jagdeo said the government is yet to make a decision on whether it will establish a National Oil Company, noting that it was a matter that requires careful consideration because the advantages (pros) of establishing an “old style” facility were few.
Jagdeo said the government was in favour of a company with a passive form of ownership, but hasten to add that based on concerns raised both by the government and other stakeholders, it seems more disadvantageous to establish a National Oil Company.
Notwithstanding, the Vice-President said the only thing that can tilt the government’s support for the establishment of such a facility is whether Guyana will be able to get more revenue through a modified Production Sharing agreement.
“No decision has been made…there are a lot of cons and few pros,” Jagdeo told a press conference on Monday at the Office of the President.
Jagdeo said the government has been paying keen attention to the ongoing debate surrounding the issue.
“… from serious sources, we are getting a list of concerns that are universally known regarding the establishment of a NOC.”
Jagdeo said among the concerns is the time it will take to develop the company, the overload it will place on domestic capabilities and capacity, and the corruption associated with national oil companies.
“These examples are encouraging,” he added, explaining that the government itself had some concerns similar to those expressed by the International Monetary Fund (IMF).
The IMF had advised Guyana to secure a higher share of profit oil through its model Production Sharing Agreement, rather than actively participating in the task of petroleum development through a national oil company.
Jagdeo says the government supports this although it doesn’t take the IMF lectures as gospel.
“From our own and what we have been looking at, an examination of the situation, we believe that having an old styled model for a national oil company could present major difficulties.
“With net-zero by 2050, it becomes harder to raise money globally for national oil companies…If we were to vest all the remaining assets in a national oil company it could lead to too much concentration and slow down the process of exploration,” Jagdeo added.
He explained that having one strategic partner to work with would mean a much slower process of exploiting the resources at a time when Guyana should be accelerating the development of these resources.
“Therefore, the model that we are talking about should we go down this route is not old-styled NOC… we want a more passive ownership of shares,” the VP added.
Already, deep-water blocks A and B have been licensed and production is moving apace.
With Block C – Guyana’s only unlicensed deep-water block – available, Jagdeo had previously talked about the possibility of doing a seismic study before the action is done.
Mapping and sizing are ongoing between the Guyana Geology and Mines Commission (GGMC) and the Petroleum Department.
Minister of Natural Resources Vickram Bharrat said recently that the government is also considering whether to auction Block C as it is – meaning the entire 9,500sq km or break it down into different parts.
Also, at the time of contract renewal for Block A and B that will give rise to the issue of relinquishment of part of that block to the state, the government is also contemplating whether that would fall under a national oil company.
