Author: ChrisRam

Posted on

Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 48)

Introduction

Column 40 noted that in practice, any Sovereign Wealth Fund for Guyana has to take a whole host of factors into account, including the country’s recurring deficits which are financed by loans; the deficit in its infrastructure; future revenue gains and losses; commodity prices including that of oil; and citizens’ rising expectations. In this Column attention moves away from the 2016 Petroleum Agreement to something into the future, something that considers how Guyana will use the oil revenues which will start flowing in 2020.

There are of course so many variables about the petroleum industry that indulging in projections is something of a fool’s game. One of the biggest uncertainties of course is the price of oil into the short, medium and long terms, which cannot be separated from the even bigger question of fossil fuel versus renewables; the cost of production by the monopoly producer; the effect of transfer pricing if any; the economic policies of the government of the day which will themselves be driven by popular expectations and political imperatives; the attitude of future governments into the next several decades to the crippling stability clause which Minister Raphael Trotman has embedded into the 2016 Agreement and the consequences of any attempt by a new Government to force a better deal; the effect of the Dutch Disease which is already rearing its ugly head with the loss of hundreds of jobs in the lower East Bank, Demerara; and of course a less likely unfavourable outcome of the border controversy with Venezuela. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 48)”

Posted on

Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 47)

Introduction

This column turns attention to the Environment Impact Assessment (EIA) for the Liza Phase 1 Develop-ment Project done by Environmental Resources Management (ERM) an external consultancy firm which describes itself as is a leading global provider of environmental, health, safety, risk, social consulting services and sustainability related services. Volume 1 of the Assessment runs to approximately 450 pages of which 100 pages make up Chapter 6 which includes a rather expansive description of non-environment related information about Guyana’s ground transportation infrastructure, the country’s Administrative Divisions, the ethnic composition of the population, the education system, the economy etc.

The consultants claim that they did not encounter any specific difficulties in preparing the EIA and that the information provided on the project and the resources found in the project development area were adequate for them to prepare a robust impact assessment.

It is with more than passing interest that ERM disclosed that the Petroleum Agreement was confidential! Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 47)”

Posted on

Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 46)

Introduction

For a country that will soon become petroleum dependent, Guyana’s petroleum legislation is not particularly expansive. There are two petroleum Acts – the Petroleum (Exploration and Production) Act comprising seventy-one sections and the largely gutted Petroleum (Production) Act which is now something of a misnomer since all it does is vest the ownership of petroleum resources found in Guyana in the State. That Act has a mere two sections. Then there is the Petroleum (Exploration and Production) Regulations made in 1986 comprising thirty-nine paragraphs, one Schedule containing four Forms, one of which has a First and a Second Schedule.

The word “environment” does not appear in any one of the Acts, and only adverbially in the Regulations in which pollution appears a few times. Fortunately, in 1996 the PPP/C Government passed into law the Environmental Protection Act (EPA). Accordingly, it was under the EPA that an environmental permit was issued on June 1, 2017 valid until 2040 for the Liza Phase 1 Project. This 46th column in the series looks at the conditions under which the environmental aspects of the petroleum operations are required to be conducted. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 46)”

Posted on

Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 45)

Introduction

After the major financial issue last week, we return today to the mundane issue of the provisions on non-associated gas in the 2016 Agreement which the three oil companies signed in June 2016. Those provisions are contained in Article 12.2 and have four paragraphs. Recall from Column 43 that non-Associated Gas is defined as “natural gas or gas other than associated gas”, i.e., gas derived from a reservoir producing predominantly crude oil.

It is probably necessary to reflect on Article 8 which embodies section 30 of the Act. That section requires notice to be given forthwith to the Minister of any discovery in the Contract and to inform him of the tests the Contractor proposes to run on the discovery and for the Contractor to submit test results to the Minister.

In its notification of the Discovery, the Contractor is required to inform the Minister whether s/he believes that such discovery is potentially commercial under the current Agreement terms, or if Contractor requires revised fiscal terms or contract terms under the Agreement to proceed with a Development Plan. It is unclear what revised fiscal terms the Contractor will require since all imports are duty and tax free and a range of income is either exempt from taxes, or better for the Contractor, is paid by the Government of Guyana. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 45)”

Posted on

Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 44)

Column 43 dealt mainly with Associated Gas and my plan was to deal with non-associated gas this week. However, the availability of the annual returns and financial statements of Hess Guyana Exploration Limited necessitates that attention turns to the famous US$460 million as pre-contract costs.

Readers of this column will be aware that the column has repeatedly lamented the failure of Hess, the holder of a 30% interest in the Stabroek Block, to meet its legal obligations to Guyana to file annual returns together with audited financial statements of the branch. Some attempt to meet that obligation has recently been made with returns for 2014 to 2016 now submitted and placed on file. However, that company’s file at the Commercial Registry shows that the annual return for the year 2015 filed on March 22, 2018 did not contain any financial statements for 2015. This is a critical year since expenditure on recoverable pre-contract cost was divided into two periods – up to December 31, 2015 and from January 1, 2016 to the effective date of the Petroleum Agreement. The amount up to December 2015 was fixed at US$460,237,918 while the amount for the period January 2016 to the effective date of the Agreement was to be agreed on or before April 30, 2017. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 44)”