New oil law, model PSAs to be finalised next month

The Government is working to finalise the new Petroleum Activities Bill and the model Production Sharing Agreements (PSAs) next month, ahead of its final extension of the oil blocks auction.
The oil blocks auction was launched in December 2022, with an April 2023 deadline, however, it was later extended to July. Now, the Government has extended to September 12 for companies to submit bids.
Vice President Bharrat Jagdeo during a press conference on Thursday assured that this is the final extension as Government plans to finalise the model PSA and to table the new oil Bill at the next sitting of the National Assembly on August 3.
“We anticipate that the legislation will be passed before the recess so we’ll have a finalised PSA and also the new Petroleum Activities Law which were the two preconditions that we set ourselves before we conclude the bid round, so both would be ready and that would give enough time to the potential bidders,” the Vice President outlined.
Jagdeo explained that despite the delay, interest in the auction appears to still be growing, with at least two potential investors expressing such.
Fourteen oil blocks are up for auction, with companies required to pay a US$20,000 fee to access the data room for the auction.
The sizes of the 14 oil blocks on auction range from 1000 to 3000 square kilometres. Under the new fiscal terms in the draft PSA, Guyana stands to benefit from as high as US$20 million signature bonuses for the deep-water blocks, and US$10 million for the shallow-water blocks.
Additionally, all future PSAs would include the retention of 50-50 profit sharing after cost recovery; the increase of the royalty from a mere two per cent to a fixed rate of 10 per cent; the imposition of a 10 per cent corporate tax; and the lowering of the cost recovery ceiling to 65 per cent from 75 per cent.
Earlier this year, US oil giant ExxonMobil had said it was awaiting the final terms of the new PSA before it made a decision on bidding for the oil blocks offshore Guyana that are up for auction.

New oil Bill
Meanwhile, on the new oil Bill, Jagdeo had revealed that stiff penalties and taxation are among the concerns raised by industry players in their feedback on the draft law.
The draft Petroleum Activities Bill contains a number of new provisions and very stiff penalties for those who fall afoul of the law. 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 licenses 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.”
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. (G11)