Category: The Road to First Oil

You will have noted that the title of the column this week has been changed from Oil and Gas – the new Economic Horizon. It comes from the banner headline of the Daily Chronicle of November 18, 1930 and is a reminder to us all that we need to start thinking oil and gas not only because of the benefits which can accrue to the country but also that there are in fact few countries which have made proper and responsible use of their oil endowment. We only have to think of the Dutch Disease, Resource Curse or Oil Curse, or think of Venezuela, the country with the highest reserves of crude oil in the world based on latest data, to recognise that oil is not a panacea. Indeed, oil countries are more than fairly represented in the list of most corrupt countries. So as we bear the topic in mind, we need to be ever conscious that oil then is neither a good indicator of a country’s economic wellbeing, its human capital or a measure of its governance.

Where does oil come from, how is it discovered, explored and extracted? Is there some pool of the gushy, mushy stuff just waiting to be taken out of the ground, whether under the earth, the sea or the oceans across continents? I have reached out to oil industry experts who have all tried to make the origin of oil and gas into a concept which I can understand and can therefore pass on. If I fail on both counts, it is entirely my fault.

After all, it is not easy for an accountant to dispel the embedded, popular notion that oil and gas reside in large cavern-like pools underground. Continue reading “Every man, woman and child in Guyana must become oil-minded (Part 6)”

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So far, these columns have taken a narrative approach and it was intended that once all the information was placed on the table, some analysis, both critical and policy directed, could be undertaken. However, it is not always possible to adhere strictly to this formula as current issues arise. For example, it was announced last week that ExxonMobil had been granted a production licence which moves closer to the day when Guyana will finally become an oil and gas producing country.

While the announcement was made in the National Assembly, there was no report of any details concerning the licence, including its duration and any other conditions imposed on the company. The Petroleum (Exploration and Production) Act does not require the gazetting of any notice of the grant, nor does the Act require its tabling in the National Assembly. Maybe caught up in the excitement of the announcement, no MP may have considered it helpful to ask the Minister to provide some details. After all, a licence is granted under section 35 of the Act and may be subject to conditions as determined by the Minister. Unfortunately therefore, it is not possible to determine any particulars under which the licence has been granted. And just in case, there is no confidentiality obligation under the law regarding disclosure of the terms of any licence or contracts. Continue reading “Oil and gas – The New Economic Horizon (Part 5)”

“We use or produce oil but the contracts that make it all possible have been secret. Until now …..” This quotation which is taken from the blurb of the book Oil Contracts – How to read and understand them while a bit optimistic, does have a ring of truth about it. Freely available on the internet, this publication under a Creative Commons licence notes a change in the transparency dynamics of oil contracts under which oil companies and governments have historically used non-existent confidentiality clauses to conceal information from their citizens and the public at large.

It bears noting, and perhaps periodic repetition, that the model (Petroleum) Production Sharing Agreement under which oil companies are granted licences for the exploration and development of petroleum imposes confidentiality obligations only in respect of petroleum data, information and reports obtained or prepared by the oil companies. Any statement to the contrary is not only misleading: it is false and untruthful. Transparency and the overriding public interest in such contracts have caused a number of such contracts to be made available both at the national and international levels. For example, the University of Dundee, Scotland; Revenue Watch Institute, an NGO; and the World Bank and others (resourcecontracts.org) are facilitating the process by collecting and disseminating them in searchable databases on the internet. It must be more than ironic that Guyanese have learnt more about their own oil resources and contracts from the US Securities and Exchange Commission than from the Government of Guyana. Neither law, logic nor the public interest requires or favours the continuing withholding of the oil contracts signed by the Government of Guyana ostensibly acting on behalf of the people of the country.

In today’s column we offer some additional information and a map of the exploration and production contracts currently in force. Continue reading “Oil and gas – The New Economic Horizon (Part 4)”

“There are not many places left on earth where you can put together an acreage portfolio like this …. Good contract terms, good support from the Government – there are not many happy hunting grounds left.” This quotation comes from Africa Oil CEO Keith Hill in referring to the situation of Kenya, not too long ago considered a frontier country with no prior history of petroleum resources and therefore having to offer generous terms to attract high-risk exploration.

This week we continue our review of the legislative framework for oil and gas exploration and development in Guyana with a focus on subsidiary legislation. However, before doing so, special attention is paid to the confidentiality provisions of the Act and those under petroleum agreements, and the taxation provisions contained in section 51 of the 1986 Petroleum (Exploration and Production) Act (Chapter 65:04). Continue reading “Oil and gas – The New Economic Horizon (Part 3)”

"Who has oil has Empire." This statement is attributed to Henry Bérenger, Advisor of French Prime Minister Georges Clemenceau quoted in the editorial in the Daily Argosy of Tuesday 16 July, 1929 on the occasion of a meeting to be held that day at the Town Hall to “discuss the steps, if any, to be taken in the matter of the development of the potential Oil Industry in British Guiana in the placing of an embargo by the British Government on the nature of Capital which should be employed in its exploitation.”

The second in this series of columns on Oil and gas turns its attention to the legislative and regulatory framework for the exploration and production of oil and gas in Guyana. While this column starts with a focus on the legislation put in place in the 1920’s and 30’s, it would not be correct to assume that no legislation existed before that time. Again turning to the Daily Argosy, this time of November 19, 1929, we note references to the imposition of an “Oil Embargo” spurred by the suspicion of the presence of oil deposits in the colony. According to the editorial, the regulations under which exploration licences were issued were modified from time to time “to safeguard the colony and the Empire’s needs.” Those regulations required that “no licences were to be issued or transferred to other than British subjects or to companies in which there was not fifty-one per cent bona fide British control and ownership.”

The effect of a policy of securing the interest of the “colony and the Empire” was to keep out the Americans. It is to be recalled that it was in Pennsylvania, USA in 1859 that the first well for petroleum was mined, allowing the Americans a position of dominance in oil production in succeeding decades. It is therefore somewhat ironic that in post-colonial Guyana, it is an American company ExxonMobil that is at the forefront of oil development, while a British company, Tullow is playing catchup, and the country’s needs and interests still very much dependent on international interests and capital. Continue reading “Oil and gas – The New Economic Horizon (Part 2)”