Sep 29, 2020 News
– North American nation did “severe reforms” to avoid conflict of interest, ensure highest levels of transparency and accountability
By Kiana Wilburg
While Guyana is considered to be in a most privileged position given the quality of its reserves, securing the most value from that resource would not be possible without effective regulation. In recognition of this reality, the Inter-American Development Bank (IDB) in a special report called, “Traversing a Slippery Slope: Guyana’s Oil Opportunity,” it was recommended that this South American nation take note of the many ways Mexico was able to transform its oil industry into one that is effectively regulated for the benefit of its people.
The IDB document noted that Mexico’s oil industry was closed to foreign investment for almost eight years and only saw the sole participation of its National Oil Company, Pemex. Things changed in 2013, where it was agreed that the sector would open up and allow for foreign interests but not until Mexico implemented a sector-wide reform.
After severe legal changes, the IDB noted that Mexico established three entities for the sole purpose of regulating operations in the industry. The National Hydrocarbons Commission (CNH as per its acronym in Spanish), was established as an independent regulatory agency responsible for the regulation of oil and gas exploration and production activities, as well as for the acreage bidding process; the Energy Regulatory Commission (CRE as per its Spanish acronym) was set up to regulate mid- and down-stream operations and issue permits for the storage, transportation and distribution of oil, gas, oil products and petrochemicals; and the Agency for Safety, Energy and Environment (ASEA as per its Spanish acronym) was developed and tasked with the responsibility of ensuring health, safety and environmental standards and regulations in the oil and gas sector, including upstream, midstream, and downstream operations.
With this in mind, the IDB report said that Guyana should consider Mexico’s best practices regarding its regulatory framework. The financial institution was keen to note that as part of the energy reform, Mexico strengthened the CNH and the CRE and created the ASEA with well deﬁned, independent mandates and proper separation of spheres of inﬂuence to avoid conﬂicts of interest. The IDB also sought to highlight that Mexico made numerous efforts to ensure that it had a licensing framework that promotes high levels of transparency and accountability.
The Bank said that these best practices among others which have been established in successful petroleum-producing countries undoubtedly represent the international ‘gold standard’ in the sector. As an emerging country, it stressed that Guyana can beneﬁt from the experiences of such countries in developing best practices for managing petroleum resources and creating good governance model frameworks.
While such practices may work well for established, well-resourced producers, the IDB cautioned that care must be taken to ensure the suitability of these practices for Guyana as an emerging producer with limited experience in regulating and administrating these types of activities.
Pic saved as IDB
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