Non-fiscal terms in new PSA could be reviewed – VP Jagdeo

…says Govt doesn’t want to deter investors

Vice President Bharrat Jagdeo has hinted at the possibility of revising the non-fiscal terms in the new Production Sharing Agreement (PSA) that the Government has drafted to ensure that Guyana gets more benefits from future oil deals.
The People’s Progressive Party/Civic (PPP/C) Administration last year introduced a series of stringent terms and conditions for new oil deals that the country will sign. These include the increase of the royalty from a mere two per cent to 10 per cent fixed rate; 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, while maintaining the retention of the 50-50 profit-sharing after cost recovery.
The 2016 oil contract for the Stabroek Block signed between the ExxonMobil-led co-venturers and the then A Partnership for National Unity/Alliance For Change (APNU/AFC) coalition Government for production in the oil-rich Stabroek Block had been heavily criticised for low royalty, lack of ring-fencing provisions and cost oil claims that saw Guyana losing billions, among other issues.
Based on feedback received, Jagdeo noted that the new PSA was said to be one of the toughest oil contracts in the market. He maintained that while there would be no changes to the fiscal terms in the new oil contract, if the non-fiscal conditions become too onerous then the Government would have to consider reviewing it.
“We got a lot of feedback that the increased fiscal terms might be acceptable, but there were some, several other areas where the conditions were too tough. We had too tough a condition globally… If they become too onerous that is where we may have to make adjustments… [But] we made it clear there will be no changes on the fiscal terms. We’re not changing the fiscal at all,” he contended.
Currently, the Guyana Government is negotiating with the six groups that were awarded blocks in the country’s inaugural oil blocks’ auction held between 2022 and 2023.
The bidding round, which was launched in December 2022, closed off in September 2023 with six companies bidding on eight of the 14 blocks offshore that were up for grabs. In total, there were 14 offers made on those blocks – two deep-sea blocks and six shallow-area blocks.
Among those awarded oil blocks during the bid round was a Guyanese female-led company, Sispro Inc, which received a shallow block (S3) and a deep-water block (D2). Other shallow blocks were awarded to Total Energies EP Guyana BV in consortium with Qatar Energy International E&P LLC and Petronas E&P Overseas Ventures SDN BHD (Malaysia), which got Block S4; Liberty Petroleum Corporation of the US and Ghana-based Cybele Energy Limited, which got Block S7, and International Group Investment Inc of Nigeria, which got two blocks – S5 and S10.
Another shallow block, S8, was awarded to the Stabroek Block partners – ExxonMobil Guyana Limited, Hess New Ventures Exploration Limited, and CNOOC Petroleum Guyana Limited. The second deep-water block – D1 – was awarded to Delcorp Inc Guyana, which comprises Watad Energy and Communications Limited and Arabian Drilling Company of Saudi Arabia.
VP Jagdeo told reporters last week that the Government was awaiting feedback to determine whether those non-fiscal terms were a deterrent to moving these deals along. This, he explained, is critical especially with Guyana gearing up to hold its second bidding round, possibly later this year, and they needed to ascertain how attractive the country would be with the current terms and conditions in the model PSA.
“The next round should be exciting, because… we will by the end of October of this year, get the 20 per cent of the Stabroek Block returned to the Government from Exxon and we already have some areas to our East that are available with us. So, you’d have more excitement ,but we don’t want because of the non-fiscal terms to kill interest and so we’re looking for the feedback,” Jagdeo stated.
However, the Vice President noted that so far, the Government has not been told that these new terms were a hindrance to any of the ongoing negotiations – either new deals or existing agreements.
This was in response to a question about the delays in the Corentyne Block, which is being operated by Canada-based CGX Energy Inc and its joint venture partner, Frontera Energy Corporation.
CGX and Frontera are trying to secure additional partners to advance operations. While oil was found in the Corentyne Block, the commercial viability is unknown.
According to Jagdeo, the joint venture partners have certain obligations under the Corentyne Block prospecting licence that they need to meet. However, he was unaware if these non-fiscal terms in the new PSA were a deterrent to them securing new investors.
“I don’t that the new fiscal regime or the new PSA is a deterrent to them securing partners as yet. That’s the feedback we’re looking for. But so far, we’ve been given assurances that they’ve approached and they’ve been given receptive ears from new partners… If this becomes a major issue not only for CGX and the others in securing partners, but anyone else who is participating in the current auction or future auction, the non-fiscal terms – because the fiscal terms are cast already – then, we’re prepared to have a look at those,” the VP stated. (G8)