Aug 01, 2022 News
…two years in office
Kaieteur News – President Irfaan Ali and the PPP administration continue to allow American oil giant, ExxonMobil and its partners to produce more oil – despite the country is weakened by archaic petroleum laws.
With two oil ships, namely the Liza Destiny and the Liza Unity in operation, Guyana is producing approximately 360,000 barrels a day. The oil operations in the country are currently being undertaken by EEPGL on the prolific Stabroek Block, which spans more than six million acres in the country’s Exclusive Economic Zone (EEZ). EEPGL is the operator of the country’s richest oil block, which is estimated to hold nearly 11 billion barrels of equivalent of oil (beo).
Years have passed since Exxon discovered massive crude oil resources in commercial quantities offshore Guyana and the country’s three-year anniversary of being an oil producing nation approaches.
Guyana’s Petroleum (Exploration and Production) Act 1986 was enacted at a time when there was no evidence of the discovery of petroleum products in commercial quantities. Since being passed, the Act was amended twice, in the years, 1992 and 1997 and since then there have been no additional changes. As such, with knowledge of the plethora of oil wealth Guyana holds – a review of the outdated oil laws is overdue. However, despite Guyana operating with decades-old petroleum laws, Vice President, Bharrat Jagdeo have been encouraging the oil companies to accelerate their production rate.
CHERRY PICKING OIL REFORM
Upon assuming office in August 2020, the PPP administration had promised an overhaul for Guyana’s petroleum laws. In fact, President Ali during his inauguration address pledged to establish a Petroleum Commission to insulate the oil and gas sector from political interference.
However, it has been 23 months since the government assumed office and it has yet to honour its promise to the nation. The Petroleum Commission Bill was initially proposed by the APNU+AFC for the establishment of an independent body which would hold responsibility for monitoring and enforcing Guyana’s modernized petroleum laws, policies and oil agreements. The body was also intended to ensure oil companies comply with health, safety and environmental standards.
That Bill was however sent to a Special Select Committee since its most fatal flaw or characteristic was that it gave the Natural Resources Minister at the time, a toxic level of control over the said body. Since assuming office, the PPP/C Government has not made any headway with the improvement of the Bill, much less its passage. The Vice President and Minister of Natural Resources, Vickram Bharrat have agreed that such a body is needed to ensure the sector is independently managed and kept away from political influence.
In fact, in March 2021, Minister Bharrat had stated that within a matter of weeks, the independent regulator the government promised to establish for the oil sector would be in place. Minister Bharrat was also quoted on the Guyana Basins Summit website as saying that the Commission is needed so it can “manage this emerging sector without political interference.”
Kaieteur News had reported that according to Bharrat, the commission will oversee the implementation of new regulations such as minimum local content requirements. Notwithstanding the importance of the Petroleum Commission Bill, the government in the meantime has engaged in the cherry-picking of legislative reform to award itself sweeping powers over the country’s oil revenue.
Kaieteur News had reported that the PPP/C Government had hurriedly passed the highly amended Natural Resources Fund Act (NRF Act) in December 2021, which gives it control over how the oil money is to be spent. The administration even amended a small part of the nation’s 1986 oil law so as to ensure ExxonMobil has a smooth flow with lands to be used or disrupted during the construction of the gas-to-energy project and other initiatives.
It was last year August Members of Parliament had debated and passed the Petroleum (Production and Exploration) Amendment Bill-2021, which ensures oversight by the government during the acquisition of private lands by a licensee for major oil projects. Significantly, it ensures that there is proper compensation for citizens when such lands are acquired.
Kaieteur News had reported that the amendments to the Bill were made in the name of Minister Bharrat. During the second reading of the Bill, the Minister noted that the amendments occur at Section 52 of the Principal Act to enhance the Government’s management of the development of the petroleum sector onshore. He had said it provides additional scope for the Minister to oversee the exercise of a licensee’s rights over private land and will further strengthen and protect private proprietary interests as enshrined in the Constitution.
Bharrat said the amendments would also apply to existing licensee operations as well as those who may wish to join the race for oil in Guyana in the future.
In light of the cherry-picking approach, government appears to have taken with legislative reform for the oil sector, international lawyer Melinda Janki during an interview with this publication cited the need for Guyana to do better on this front. Janki categorically stated that the country needs stronger rules to guarantee transparency, accountability, impartiality, and independence in Guyana’s oil and gas sector. Janki even called on citizens to defend grave financial and economic threat that are posed by the determination to the oil and gas under an exploitive and abusive contract. Attorney-at-Law, Christopher Ram, in a previous interview with this newspaper had also hammered home the importance of this crucial regulator while bemoaning the seeming unwillingness of the current government to get the ball rolling on this matter.
NEW BILL NEEDED
In December 2020, the Inter-American Development Bank (IDB) had released a report pointing out the glaring loopholes in Guyana’s legislative framework which essentially weakens the shield of protection that is needed for the oil sector.
According to the Bank, the Petroleum Exploration and Production Act and the Petroleum Commission Bill, in their current state, do not contain any clauses that guarantee the independence of any regulator that is appointed for the sector nor do they ensure adherence to industry norms.
The financial institution said that a new Petroleum Commission Bill is urgently needed to address these gaps that avoid or reduce control over technical and procedural aspects of the regulator.
The Bank had pointed out that this situation impacts the approval, amendment, and rejection of information submitted by international oil companies for petroleum prospecting and production licences; preparation and management of bid rounds for licence grants; and approval, amendment and rejection of petroleum operators’ budgets, work programmes, field development plans, production forecasts and decommissioning plans.
For its part, in a 2017 report the International Monetary Fund (IMF) had identified numerous deficiencies in the Act and where it was recommended that the authorities consider reforming and modernizing the legal and fiscal framework for petroleum exploration and production.
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