New Petroleum Bill: Concerns raised about stiff penalties, taxation

Stiff penalties and taxation are among the concerns raised by industry players in their feedback on the draft Petroleum Activities Bill which was released last month for public reaction over a two-week period.
Vice President Bharrat Jagdeo told a press conference on Thursday that the Government is currently going through the extensive feedback it has received on the Bill, which will replace the 1986 Petroleum Act.
As part of the oil block auction, companies are required to define their development plan and cost and the draft Bill stipulates that if they fail to pursue it in the given timeframe, there is a penalty that is almost equivalent to the cost of the development plan.
“So, for example if you put that you will spend US$350 million to drill three wells and then you don’t do it in the period, you’ll now have to pay US$350 million in fine…some people question that, that it may be too high…right now there is no fine,” Jagdeo explained, noting that this is one area where some industry players have expressed concerns.
Another aspect, he said, has to do with taxation.
“Some concerns about expenses, especially on the taxation side, because the law dealt with a series of taxes too like waivers but our concern is blanket waivers. We don’t want to give a blanket waiver, like when Exxon thought they had blanket waiver for transport and they wanted to bring in a large number of SUVs, we denied them that,” he explained.
“So those are the kinds of issues we’re navigating through as we finalise the document to go to Parliament shortly.”
Jagdeo also called out the A Partnership for National Unity and the Alliance For Change Opposition for not formally submitting their feedback on the Bill. The Opposition had said it would share its concerns during the debate in the National Assembly.
But Jagdeo said the Opposition parliamentarians will only “go there and grandstand” since they were “afraid” to make formal submissions for fear of looking “silly” when their points would be rebutted.
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)