Get the best to build your oil industry; don’t rush to sign deals and live to regret it – African Oil Expert

Mar 18, 2021 News

By Kiana Wilburg

Secretary General of the African Petroleum Producers’ Organization (APPO), Dr. Omar Farouk Ibrahim.

Kaieteur News – As the members of the People’s Progressive Party/ Civic (PPP/C) Government pursue the development of a robust regulatory and legislative framework for the oil and gas industry, there are some key pieces of advice, which it must always keep at the forefront of its mind.
According to Secretary General of the African Petroleum Producers’ Organisation (APPO), Dr. Omar Farouk Ibrahim, the new oil producing state must ensure it hires the best experts from across the world to build its local content capabilities and avoid rushing into contracts it could end up regretting later on.
The official made these assertions yesterday during a panel discussion hosted by the Guyana Basins Summit.
The topic of discussion for the session was: Positioning the Guyana-Suriname Basin as a World-Class Hydrocarbons Industry: Lessons from around the World. It saw contributions from Iman Hill, Executive Director at the International Association of Oil and Gas Producers (IOGP); and Bob Fryklund, Chief Upstream Strategist and Vice President at IHS Markit.
During his opening remarks, Dr. Ibrahim was keen to provide advice as it relates to contractual arrangements. On this note, he said that countries that have just discovered oil and gas often find themselves rushing into agreements without completely understanding the terms that they are binding their nations to. And if they do comprehend the terms, they are so consumed by the desire to pump oil that by the time the proverbial chickens have come home to roost, they are gripped by feelings of regret.
He said it is critical that countries avoid such circumstances by getting the right experts to be part of their team when signing oil deals. He said that many countries have made the mistake, which he pointed out and are now left to live with the consequences.
Further to the need for being cautious on contract signing, the former Advisor to four ministers of Petroleum of Nigeria between 2009 and 2020, urged Guyana to ensure that experts are incorporated into its efforts at building local content capabilities. The official said this is key so that citizens can have the skill sets to have maximum participation in the sector.
One of the key agreements that Guyana’s leaders would have received staunch criticism over relates to the Stabroek Block Production Sharing Agreement (PSA). That lopsided deal was signed with ExxonMobil and its partners, Hess Corporation and CNOOC/NEXEN.
Kaieteur News would have conducted an investigative piece, which examined the provisions of the PSA in comparison with others across the world. That analysis found that out of over 120 PSAs, which this newspaper examined, Guyana’s is the only one, which has more than a dozen odd provisions.
For example, the Guyana-ExxonMobil PSA is the only one out of 130 contracts, which has no ring-fencing provisions to prevent costs of unsuccessful wells being carried over to that of successful wells.
There is also no sliding scale for royalty to increase as production improves.
Also working against Guyana is the fact that the Stabroek Block PSA is the only one out of 130 that allows insurance premiums to be fully recovered as well as exorbitant interests on loans and financing costs that are incurred by the contractors.
The 130 PSAs examined are part of a register on www.resourcecontracts.org. (https://resourcecontracts.org/search?q=Production+Sharing+Agreement+) That website offers over 620 PSAs from around the world for perusal.