– addresses cross-field reservoirs’ utilisation
– imposes stiff penalties for non-adherence to law
The Natural Resources Ministry has released the draft Petroleum Activities Bill that will eventually replace the 1986 Petroleum Act, for a two-week period of public consultation. In it are a number of new provisions and very stiff penalties for those who fall afoul of the law.
The draft Petroleum Activities Bill which was released on Tuesday for public feedback will replace the 1986 Petroleum Act with the aim of improving the existing laws governing safety, emergency responses, and other oil and gas-related issues.
Among the areas it looks to make improvement in is mandating that oil companies make tangible contributions not only on a social level but a capacity-building level. The Bill contains a provision enforcing petroleum exploration and production licences that may “provide for the payment of a training fee payable annually throughout the validity of the petroleum agreement.”
It also provides for oil companies to establish a system of financial support for environmental and social projects, which they will fund out of pocket. According to the Bill, “the terms of the programme and the financial contribution by the licensee are established in the petroleum agreement.”
There is also a provision that allows the Government to call on the oil company to supply it with oil if the domestic needs of the country outstrip Guyana’s crude entitlement.
However, the Bill makes it clear that “the volume of crude oil which the licensee shall be required to sell under this section shall not exceed their share of profit oil entitlement under the petroleum agreement.”
According to the Ministry, the Bill also includes supervising and monitoring requirements. It will also authorise the Minister to make recommendations regarding exploration and production. Specifically, the Bill will give the Minister the power of unitisation.
Unitisation is the act of combining the drilling rights of an oil reservoir being drilled that happens to straddle two fields, ensuring that conflicting interests are balanced. Such a case must be brought to the subject Minister’s attention.
“The licensee that identified the reservoir must notify the Minister of the existence of such reservoir within a timeframe to be prescribed by regulation. (3) The notice under subsection (2) must include a technical report of the geological characteristics of the reservoir, and any studies, interpretations, and well data that helped determine the boundaries of the reservoir,” the draft Bill states.
“(4) Upon receipt of the notice under subsections (2) and (3) the Minister must notify the holders of the adjacent licence or licences that overlay the reservoir, of the existence of a reservoir that crosses the boundaries of their respective licence or licences and give directions pursuant to subsection,” it added.
Licensees will be given time to reach a mutually acceptable agreement to develop the reservoir as a single unit… an agreement that must be approved by the subject Minister. In cases where the reservoir extends into an unlicensed zone, the company must apply to the Minister to incorporate the unlicensed part of the reservoir into their own.
Section 44 (4) of the Bill states that “No unitisation agreement shall be entered between the licensee and holders of rights to the cross-border petroleum reservoir in the neighbouring country until a unitisation treaty or agreement is entered between the Government of Guyana and the neighbouring state where part of the petroleum reservoir extends.”
Further, the Bill also contains stiff penalties. For instance, an individual can be fined up to $30 million and/or be subjected to up to three years’ imprisonment for any violations under the law. There is also a fine of not more than $10 million for failure to comply with any order issued under the law.
The Bill also expands the legislation to cover carbon dioxide (CO2) storage and pipeline transportation, no doubt a nod to the gas-to-energy project. Notably, the Ministry assured that more regulations will follow in the coming months to further boost the sector’s oversight.
While this is the first time the principal Act is being overhauled, an amendment was previously brought to the 1986 Act. The Petroleum (Amendment) Bill 2021 was brought to the National Assembly to amend Section 52, which deals with land use.
It specifically targeted work done by oil companies on State land, for example, the work done by ExxonMobil in landing the gas-to-shore pipes.
