Introduction
The observation was made much earlier in the series and repeated for emphasis last week: Guyana’s present petroleum fiscal regime encompasses both 1) its basic constitutional, economic, financial, and accounting legislation, as well as 2) the specific terms and conditions enshrined in the 2016 Production Sharing Agreement (PSA). Indeed, this dual combination holds for all countries. Such worldwide information is reported in annual directories (for example, the Ernst & Young: Global Oil and Gas Tax Guide). For 2017 this Guide has reported that companies engaged in upstream petroleum operations in Guyana, are, in the main, governed by the Petroleum Act, Petroleum (Production) Act, Petroleum (Exploration and Production) Act, Maritime Zones Act, Income Tax Act, Corporation Tax Act, Capital Gains Act, Property Tax Act, and taxes as the Value Added Tax (VAT), and excise tax laws levied indirectly on items.
In similar manner, my columns on the fiscal regime have also sought to confirm the truism: there is no single system [fiscal regime] which is right for every situation. Worldwide, there are great differences in the petroleum sector as regards geological prospects, reservoir conditions, costs, prices, infrastructure and availability of services. Consequently, “attractive investment opportunities can exist in several jurisdictions, and a fiscal system which works in one, may not work in another”. (Oil Contracts, p 93). Readers should be reminded here that this assertion comes from perhaps the most celebrated progressive civil society advocacy group for transparency and fairness in global oil contracts!
Guided by similar contributions, I have repeatedly urged in this series that Guyana’s 2016 PSA should be judged on four basic criteria, namely, its treatment of 1) changing profitability of Exxon and partners (Contractor); 2) the choice the Government of Guyana (GoG) makes between revenue now (early) or later; 3) the total risk allocation outcome between Contractor and GoG; as well as, 4) the PSA’s impact on sustainable investment flows into the sector.