There will be a new Production Sharing Agreement (PSA) for new oil activities offshore Guyana, including the upcoming oil blocks’ auction, but the government will not change existing contracts as part of efforts to maintain the favourable investor confidence in Guyana.
This is according to a release from the Ministry of Natural Resources, which reiterated the position of the government on oil contracts locally.
A new PSA, which promises to yield better economic benefits for Guyana, is currently being developed by the government.
With this model PSA, the release noted, the 2016 model or any previous PSA will not be applied to any other block where a new discovery has been made. Instead the model PSA will guide both exploration and production activities.
That aside, it was explained that the reason for maintaining the sanctity of the existing contracts, at least until the period for contract renegotiation is arrived at, is to maintain the favourable investor confidence in Guyana.
“The government is of the view, as has been underscored by (President) Dr Mohamed Irfaan Ali and Vice President Dr Bharrat Jagdeo, that if specific fiscal considerations are amended in the current PSA, then that could impose unfavourable effects on current and future investments in Guyana, given the current world petroleum economy.
“The Government of Guyana respects the investments made by the petroleum consortium in the Stabroek Block and will continue to work assiduously, through various agencies, on every additional license and environmental permit as has been done for Payara and Yellowtail developments,” the release noted.
Further, it posited that the Payara and Yellowtail developments (which saw improved contracts) signal that with the prudent management of the oil and gas sector, Guyana can garner more economic and social benefits for improved intergenerational equity of the local economy.
During a recent online engagement, the Vice President highlighted that this new PSA is part of the government’s efforts at reaping more benefits for Guyana from the new oil industry. He said it joins other beneficial measures such as the introduction of new laws and new projects.
Meanwhile, it was noted that the incumbent administration is cognisant of the amendment made to the 2016 PSA by the former APNU+AFC government, dated April 26, 2019.
This amendment prevents ExxonMobil Guyana from recovering, through cost oil, the two per cent royalty to be paid to the nation. And the release noted that this modification has been implemented and enforced through the mechanisms on the payments for royalties and cost recovery conditions, and the monitoring features which set out for the governance of the cost bank regarding the projects subject to petroleum operations.
Though it has been advanced that this 2019 revision sets the precedent for the renegotiation of the entire contract between Guyana and ExxonMobil, the ministry reiterated that the contract will remain fiscally unchanged for the country and investors’ benefits.
