Despite the euphoria prompted by a favourable tribunal ruling last year, it is unlikely that drilling for oil in Guyana’s waters will begin soon.
And the ever-climbing prices for petroleum may not necessarily spell windfall for Guyana should CGX Energy Inc, Repsol YPF and Exxon among other projects find oil, since the cost of production has also risen considerably.
But these companies are locked into production sharing agreements that would guarantee at least half of what comes in from the discoveries and the exploitation of petroleum resources going to Government coffers, according to Newell Dennison, Petroleum Manager at the Guyana Geology and Mines Commission (GGMC).
Speaking with this newspaper on Friday, Dennison said that Guyana has a policy which states that sharing of profits will be at least on a 50/50 basis between the companies and the country. But he pointed out that each of the three large explorers have varying ratios of profit sharing and it doesn’t matter whether or not the company is making a profit – Guyana gets its cut of at least half.
Dennison said that he isn’t aware that any of the companies was seeking to secure a better deal on the sharing of production gains.
But he said that during the earlier stages of the negotiations, if anyone had any inkling that oil would have reached US$120 per barrel, “we may have been able to structure something to cater for a windfall.”