Govt halts granting more oil concessions until 2020

– designing new model contract to use for future PSAs

Although a large number of international companies have already indicated their interest in exploring the remaining oil blocks offshore Guyana, these companies will have to wait a while longer as the Government has ceased granting concessions until early 2020.
This was revealed at a press conference held by the Department of Energy in the Ministry of Presidency on Thursday. Head of the Department, Dr Mark Bynoe said they are engaged in developing a new model contract to use for future Production Sharing Agreements (PSAs).
“We do not envisage a possible licensing round, maybe till early 2020 and that’s being realistic in terms of where we are going,” he said at his first press conference since assuming his role about three months ago when asked to

provide a timeline for this new arrangement.
Dr Bynoe went on to explain that in addition to designing the new model contract that will be used for future PSAs, they will be elaborating a model tool kit to allow probabilistic scenario modelling of current and future PSA contracts that involves Guyana.
“The Department recognises the need for strong legislative framework, but in doing so, it understands the need for us to first review where we are. In keeping with this, the Department is reviewing the current legal and regulatory framework for the petroleum sector, inclusive of the 1986 Petroleum Act,” Dr Bynoe said, while responding to media operatives when questioned.
On the other hand, Oil and Gas Advisor to the Department of Energy, Matthew Wilks also weighed in on the issue, explaining that the model contracts are the basis for negotiations and are set in the context of the time in which they are introduced, but evolves overtime.
“So, a model contract that is used to try and attract good investment at the onset of the petroleum industry is very different from a model contract as the industry matures and very different from a very mature industry,” he explained.
This move is in response to criticisms the Government has received over the current Petroleum Sharing Agreement with ExxonMobil and other companies regarding the oil sector. Civil society groups, critics, analysts and commentators have all be advocating for the Government through the Department put better and stronger measures in place for such agreements.
De-risked
The Energy Department Head made reference to the Canje Block which is referred to as Block C, stating, “We do understand that there is significant interest in Block C and we are not anxious to allocate Block C just yet until we have these complementary pieces in place.”
Dr Bynoe also debunked claims that with the operation of major oil companies such an ExxonMobil and Total in the offshore, the basins are de-risked. As a matter of fact, he claimed that a small portion has been de-risked, and not the other way around.
According to him, ExxonMobil has done some work but there are still significant areas in deep water that have not been de-risked. In fact, he said there has no activity onshore. But the Government is now looking to offer data packages to stimulate investor interest.
Another major concern regarding the PSA between Guyana and ExxonMobil was also brought up during the press conference which dealt with the stabilisation clause. This clause is commonly inserted in contracts between investors and host nations to protect investors from future changes in the law that affect the economics of the project.
Wilks explained that the weaker the complementary legislation, the greater the demand for stabilisation clauses. As such, in going forward, Dr Bynoe said Government should seek to strengthen the supporting legislation, and possibly reviewing the current stabilisation clause.
The Department of Energy was established in August when President David Granger shifted the responsibility for the petroleum sector from the Ministry of Natural Resources to the Ministry of the Presidency. The move to establish a Department follows a proposal submitted by Natural Resources Minister Raphael Trotman, to have a specialised attention placed on the petroleum sector, given the complexity of tasks that exist with the administering of such resources.
The Department plans to work closely with the Environmental Protection Agency, Guyana Revenue Authority and Auditor General’s Office. It is expected to eventually become a full Government Ministry. At present, Government is looking to recruit more persons to staff the Department with specialists that could make it robust and efficient in handling oil matters.