Guyana’s first report reveals…Sloth of legal reform stifling progress in oil sector

Apr 28, 2019 News

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By Kiana Wilburg
The absence of modern legislation to guide the oil and gas sector does not auger well for the nation’s future. In fact, it is stifling progress in the sector. This point was noted in the first report on Guyana since it became part of the Extractive Industries Transparency Initiative (EITI) fold.
The document notes that Guyana’s upstream oil and gas sector is governed by the Petroleum Exploration and Production Act (1986), and the Petroleum and Exploration Regulations (1986). It states that the Government of Guyana is currently undertaking several reforms in the preparation for the emerging oil and gas sector such as the Petroleum Exploration and Production Bill, which will repeal and replace the current Act and Petroleum Environmental Production Pollution Control Regulations as well as the Petroleum Health and Safety Regulations, which are currently being reviewed.
The report noted, “The oil and gas sector in Guyana is currently in the production phase, which is expected to start in the beginning of 2020. However, to date, the reform of the Petroleum Exploration and Production Act is still in progress. This situation does not allow a favourable investment environment for petroleum companies to carry out intensive exploration and production activities.”
In order to promote a favourable legal environment for investment and in a bid to boost the confidence of private operators in the country, the report strongly recommended that the Multi-Stakeholder Group of the local EITI Chapter follow up with the Department of Energy at the Ministry of the Presidency in a bid to accelerate the reform of the petroleum legislation and to address any technical barriers delaying the process.
EITI AND GUYANA
The EITI is an international body that requires implementing countries publish comprehensive reports which includes the full disclosure of government revenues from the extractive sector, as well as the disclosure of all material payments made to the government by companies operating in the oil, gas and mining sectors.
The objective of Guyana’s first report is to help in the understanding of the level of contributions of the extractive sector to the economic and social development of the nation in order to improve transparency and good governance at all levels of the extractive industry value chain.
BDO LLP, a United Kingdom (UK) Accountancy and Advisory firm was appointed as the Independent Administrator to prepare the first GYEITI Report for the year ended 31, December 2017.
CHATHAM HOUSE ADVISES
Chatham House, an international transparency body that helps countries with the governance of their extractive sectors, has also called for Guyana to reform its laws for the oil sector.
In fact, the London-based body said that if Guyana intends to be successful with the governance of its oil sector, it must ensure that there are clear oil related policies and systems to ensure accountability of the oil wealth to come.
On this premise, Chatham House recommended that policies for the oil and gas sector be guided by a clear vision for the development of the country and a strategic view of how the petroleum sector will deliver that vision.
Speaking to other guidelines, Chatham House warned that the rush to adopt international best practices may not always be appropriate in the case of emerging producers in the oil and gas sector. Instead, Chatham House said that the government should aim for more appropriate practices, taking account of the national context.
Chatham House said, “In order to attract the most qualified oil company to a country with an unproven resource base, the host government can invest in geological data, strengthen its prequalification criteria and ensure transparency. It should also plan for success and anticipate the implications of hydrocarbon discoveries in its tax code, and be robust through declining oil and gas prices.”
As for the aspect of licensing, Chatham House said that this is a key mechanism whereby government can reap early revenues and maximize long-term national benefits. It said that Government must ensure that it simplifies both negotiations and tax structures to mitigate knowledge asymmetries with oil companies.
It said, too, that the government and industry must engage and share information with communities to manage local expectations regarding the petroleum sector and build trust.
“In emerging producers, budgets for local content may be small and timelines for building capacity short. In this context, the focus should be on the potential for repeat use of any local capacity developed. Additionally, meaningful participation of national organizations in resource development is a central objective of many emerging producers.”
The international body said that once the aforementioned are followed, Guyana would be well on its way to laying a strong foundation for the protection of the oil sector.

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