…says new laws, PSA will increase Guyana’s share of profits
Guyana’s management of the oil and gas sector and the transparency with which the country has been handling oil revenues have come in for plaudits from the International Monetary Fund (IMF) in its concluding statement of its 2023 Article IV consultations.
According to the IMF team who met with Government officials and stakeholders during their visit to Guyana, the People’s Progressive Party/Civic (PPP/C) Government has made progress strengthening management and transparency in the oil sector. Reference was made to the Natural Resource Fund (NRF).
“The NRF Act, amended in 2021, enhanced transparency and accountability of the use of oil revenues. In 2022, the governance of the NRF was strengthened with the appointment of three critical bodies: the NRF Board of Directors, the Public Accountability and Oversight Committee, and the Investment Committee.”
“The year 2022 was the first year when oil revenues were transferred from the NRF to the budget. The use of the funds is reported in the budget documents, and all receipts are published. The process continued with the 2023 budget,” the IMF team said.
The IMF further noted that progress has been made implementing the recommendations from the 2019 Extractive Industries Transparency Initiative (EITI) reports, notably on the reconciliation with the fiscal regime.
The EITI had allocated Guyana a score of 52 for implementing the 2019 standard, commending Guyana for the strides made to make information available and consult with stakeholders, while also providing recommendations to further strengthen the system.
In its report, the EITI Board recommended, among other things, that Guyana ensure employment data as submitted by companies in the extractive sector are disaggregated by gender. They also recommended that Guyana ensure all legal or contractual mandates for companies to make social expenditures are disclosed, as well as the expenditures themselves.
It was further recommended that Guyana ensure both Government and companies in the extractive sector fully comply with all aspects of implementing the standard. This includes ensuring sufficient technical and financial resources.
Another recommendation, which EITI said is in accordance with Requirement 2.5, was for Guyana to ensure that the beneficial ownership of all companies holding or applying for mining, oil and gas licences was comprehensively and reliably disclosed.
IMF support
The IMF also expressed support for Guyana’s efforts to address remaining gaps, including in moving towards electronic disclosure and adequate follow-up. It also referenced the updating of the 1986 Petroleum Exploration and Production Act, which was modernised and approved by Parliament in August 2023.
A key highlight of the new Act is cross-border unitisation. This empowers the subject Minister to consult with the Cabinet and engage in negotiations with neighbouring States regarding petroleum reservoirs that extend into their territories.
The Act also mandates licensees to apply for a geological storage licence for carbon dioxide. This allows licensees to explore potential carbon dioxide storage sites specified in their licences, develop underground storage facilities, and undertake operations incidental to carbon dioxide storage.
The legislation also prohibits Government officials, Members of Parliament, and their family members from acquiring or holding any legal, equitable, or beneficial interest in a petroleum licence granted under the new Act. This prohibition is a crucial step towards preventing conflicts of interest and fostering a level playing field for all stakeholders.
According to the IMF, the new Act will enhance the regulation of the oil and gas industry, further paving the way for developing the industry. It was also noted that a new Profit-Sharing Agreement (PSA) was implemented and according to the team, will be used for the auction of the 14 new oil and gas blocks, which just came to an end, and increase the Government’s share of oil profits. (G3)
