Tag: Oil and Gas

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Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 40)

Introduction

In the course of his presentation of Budget Speech 2018 delivered on November 27, 2017, the Minister of Finance announced that the Government of Guyana would be partnering with the Islamic Development Bank (IsDB/the Bank), through the Malaysia Agricultural Research and Development Institute (MARDI), to update the expertise and technology in rice production through a Reverse Linkage Project to the tune of US$863,000. The Bank did not feature in the exchanges in the Budget debate so it was with more than a little surprise that the local media, citing a speech by the Minister to the annual meeting of the Bank, reported that the Bank would be lending roughly US$900 million to Guyana, its newest member.

It would have been, after all, the largest single loan ever taken by this country, and on a per capita basis, the largest loan ever extended to a member country by the Islamic Development Bank. The Ministry of Finance later walked back on that statement, clarifying that it was rather a “resource envelope of US900M that is potentially available from which the Government of the Cooperative Republic of Guyana can borrow.” The ministry’s clarification said that during the period 27-29 November 2017, the IsDB mounted a mission to Guyana to develop a medium term work plan for the period 2018- 2022, setting out a pipeline of projects that the Bank can support over the next five years.

As Guyana moves to First Oil – and let us face it, into general and regional elections – the temptation to spend will be almost irresistible, posing a risk to the much anticipated Sovereign Wealth Fund (SWF). That risk is real and cannot be discounted. So far, the discussion on the SWF has largely been theoretical and centred on possible models. In practice, the SWF 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’ expectations which continue to rise. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 40)”

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Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 39)

Introduction

In this the 39th column I wrap up the comparison of the 1999 and 2016 contracts by looking at Annex D which is completely new in the 2016 Agreement. Annex D is derived from Article 21, addressed in Column 34 and containing a non-exhaustive list of nearly 250 classes of items which can be imported under the Agreement. As pointed out earlier, this Annex constitutes a carte blanche dispensing with any requirement for approval by the petroleum regulators. These items are now deemed approved and certified by the Chief Inspector, an office which Minister Trotman has failed to fill after nearly three years. What more can one say about Trotman and the APNU+AFC Government! For one thing, that he was being at least disingenuous earlier when he described the 2016 Agreement as a tweaked version of the 1999 Agreement.

There have been roughly two dozen columns comparing the 1999 and the 2016 Petroleum Agreements. Of course, an absolutely total comparison has not been possible because both the PPP/C and the APNU+AFC Governments have withheld important documents from the public. Even if the Granger Administration was forced into releasing the 2016 Agreement, they deserve a little credit for doing so. At the same time, they have been stubbornly resistant to releasing the Bridging Deed and have also withheld the 2016 Prospecting Licence and the 2017 Production Licence. On the other hand, the PPP/C in sixteen years kept the 1999 Agreement secret as well as the 2008 Addendum. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 39)”

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Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 38)

Introduction

Column 37 which appeared last week dealt with the classification of costs and as indicated there, attention now turns to what Annex C describes as Pre-contract costs. In this regard, a major insertion in the 2016 Agreement which has aroused considerable curiosity relates to an amount of US$460,237,918 by the Contractors for pre-Contract costs incurred under the 1999 Agreement. This is included in section 3.1 of Annex C “Costs Recoverable Without Further Approval of the Minister”. This is also not the entire sum for pre-contract cost but represents only those costs claimed to have been incurred up to December 31, 2015. Additionally, the 2016 Agreement also provides that cost incurred between January 1, 2016 and the Effective date of the Agreement constitute part of the cost of petroleum operations. All that was required in the latter case was for the Contractor to notify the Minister of those costs no later than October 31, 2016. The Minister had six months to agree such costs.

The separation of the two costs suggests that the US$460,237,918 is final while in the case of the costs incurred between January 1, 2016 and the effective date, the time for any challenge was April 30, 2017. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 38)”

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Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 37)

Size

Column 36 published on Friday February 16, concluded the comparison of the 1999 and the 2016 Agreements proper. Today’s column therefore turns attention to the Annexes to the Agreement. Both Annex A and Annex B deal with the Contract Area, Annex A giving a description of the Contract Area while Annex B sets out a map of the Area. The term “Contract Area” in both Agreements is identically defined as the area that would be subject to a Prospecting Licence and a Production Licence.

The 2016 Agreement states that the Contract Area is 26,806 square kilometres while the 1999 Agreement describes it as comprising 60,000 square kilometres, a huge difference. I have written to the Guyana Geology and Mines Commission seeking a clarification on the difference.

Meanwhile it should be noted that an ExxonMobil news Release dated February 8, 2018 gives the gross acres held offshore in Guyana at 11.5 million, which is greater than the Contract Area stated in the 2016 Agreement. The explanation I believe is that the Release seems to make no distinction between acreage in which Esso/Exxon was the original licencee (the Stabroek Block), and where it is not the primary licencee but in which it has an interest (the Canje and the Kaieteur Blocks). Nor does it take account of the percentage shares in the Blocks whether as primary licencee or buy-in. For example, in the Stabroek Block, having sold 55% of its interest to Hess and CNOOC, Esso holds 45% of that Block while in the Canje Block and the Kaieteur Block it acquired interest of 35% and 50% respectively. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 37)”

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Minister made some outlandish comments on oil contract at PSC’s seminar

I attended the Private Sector Commission’s Seminar on March 6, 2018: Oil and Gas in Guyana: Perspectives for the Local Private Sector, at which ministerial remarks were made by Minister of Business, Mr Dominic Gaskin. Instead of informing the audience of the measures contemplated by the Government to deliver economic and social benefits to individuals, communities, businesses and employed persons from the exploitation of non-renewable petroleum resources, the Minister stunned at least some in the audience with his attack on sections of the media, his unbelievably misinformed and inappropriate comments on the Esso/Hess/CNOOC Petroleum contract, and his incomplete and flawed contrast between oil and gold. Continue reading “Minister made some outlandish comments on oil contract at PSC’s seminar”