Introduction
Last week’s column ended with a pointed reference to there being several concrete examples of governance issues and reforms recently set in motion and designed to make the Stabroek PSA operate in a more effective manner. Today’s column briefly indicates a few of the reforms and adjustments to the ruling Stabroek PSA that have already been set in train by the Authorities.
These apply to both the old and new Model PSA.
The recently published Mid-year Bank of Guyana Report is an excellent source for these details. Indeed, I make great use of these details in the next Section.
Legal, Regulatory, and Institutional Reforms
The Ministry of Finance 2024 Mid-Year Report has indicated that, during this year, the Authorities have been involved in a number of legal, regulatory, and institutional reforms in regard to work it has started on key pieces of legislation governing the oil and gas sector; namely,
1] the drafting of the regulations required to enforce the provisions of the Petroleum Activities Act (PAA) 2023. Upon completing the draft and subsequent stakeholder consultations on it, the regulations will be presented to the National Assembly. – [Following the enactment of the regulations, there will be the issuance of the prospecting licenses and signing of Production Sharing Act]
2] begin drafting of the National Oil Incident, Emergency Response, and Financial Responsibility Bill 2024. As also reported in the Mid-year Report, this Bill, while addressing other areas, will deal with the management of and financial responsibility for oil spills and environmental damages from petroleum activities. The Bill is expected to be completed for public consultation and subsequent tabling in Parliament by the end of this year.
Of note, it is further reported that works have commenced on the Health and Safety Regulations for the petroleum sector, along with guidance on revisions to the Local Content Act 2021. The Authorities have advised that, later this year, a review of the Act’s first schedule, is to take place alongside public consultations. The consultation process is geared at sensitizing the business community on the performance of the 40 carved-out areas and scope for additional areas, kicked off in Leonora and with the Private Sector Commission. The feedback thus far already has signaled the capacity to supply 25 additional services.
The primary government agencies are charged with the responsibility to strengthen their management and monitoring structures. Thus, although Government approved the Whiptail Project in April of this year, the Operator was mandated, via the Petroleum Production License (PPL), to include a decommissioning fund in keeping with the PAA 2023.
Similarly, amongst other provisions, the Authorities claim the Fund is intended to safeguard from the risk of financing decommissioning liabilities. The Whiptail PPL is conditional on the Operator, at all times, having insurance, with documentation of this provided to Government before start-up. Additionally, the procurement of a capping stack equipment in-country and additional subscriptions for the Stabroek Block was mandated via the Yellowtail PPL. This equipment, designed to be placed as a cover over a blow out well to stop or redirect the flow of hydrocarbons, was commissioned in July 2024, enhancing the sector’s oil spill capabilities, and makes Guyana one of only two oil-producing countries in Latin America and the Caribbean and of 13 globally to have such a mechanism in place. This clearly reflects a conscious effort by Government to ensure the sector conducts its activities in accordance with industry safety standards.
In addition, the Environmental Protection Agency continued to strengthen its monitoring of operations offshore. The Guyana Revenue Authority also made progress by staffing key departments examining oil companies’ revenues and cost recovery statements as well as performing customs controls. Regarding the latter, an office has been operationalized at the Customs Boathouse to ensure timely processing of ingress and egress of vessels and lodging of requisite documentation. Moreover, Standard Operating Procedures have been crafted and once approved by the Customs and Trade Administration, will enhance the monitoring of all shorebases, including the examination of outbound vessels with oil and gas related items; closure of files; and the presence of officers’ aboard installation vessels with helipads for the examination of cargo outbound and inbound.
Finally, all key Government agencies benefitted from capacity building in the first half of the year, particularly in crude marketing, economic modelling, and cost benchmarking. Following these training sessions, the QUE$TOR Software was procured to enable the agencies to examine cost and revenue statements as well as field development plans (FDP) and work programmes submitted by the oil companies.
Conclusion
From the varied and detailed scope of the legal, regulatory and institutional reforms that I have highlighted above, which have been clearly set in train by the initiatives of the Authorities, one should note these processes clearly apply to both the ruling Stabroek PSA , as well as the new Model PSA and its public auctions modality.
In next week’s column I wrap-up this discussion of the Guyana PSA both from a retrospective backward looking standpoint, to a prospective, forward looking, standpoint.
