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Jul 19, 2023 ExxonMobil, News, Oil & Gas
By Kiana Wilburg
Kaieteur News – If governments are desirous of having their oil resources developed optimally and in the interest of their people, then they must ensure clear legislative requirements are in place to govern how oil companies’ draft their Field Development Plans (FDPs).
Outlining this perspective in a handbook for government officials was Naadira Ogeer, Economic Advisor in Commonwealth Secretariat’s Ocean and Natural Resources Advisory Division.
The handbook with a total of 132 pages was developed to support government officials in Commonwealth member countries in the effective review, approval, and oversight of Field Development Plans.
Ogeer noted that the publication published by the Commonwealth Secretariat benefitted immensely from discussions and reviews with government officials from Belize, Ghana, Guyana, Kenya, Mauritania Mozambique, Namibia, Sudan, Suriname, Tanzania and Uganda as well as a number of individuals and organizations with expertise in FDPs.
Before dissecting some of the key responsibilities of government officials in the FDP process, the handbook dedicated several pages to explaining what a FDP is. It was noted that after a company makes an oil/gas discovery and determined it to be in commercial quantities, the next step is to prepare a plan of development. That plan outlines how a company intends to develop a petroleum field, manage the impact on the environment and society, as well as forecasts for production and costs. The FDP is therefore the company’s blueprint for how this will be done. It is considered a critical roadmap for both the company and the country to maximise value and minimise risks from an oil and gas project.
The Commonwealth advisor noted in the book that the FDP is a critical moment in the project lifecycle as it is the place where decisions will affect the field value and associated benefits to the country for 20 years or more. For a developing country, the expert noted that a single FDP can easily be equal to, or double the size of, the entire economy because of the scale of investments and potential government revenues. “It is therefore of paramount importance that the government is able to review these plans to ensure that the economic, social and environmental issues are effectively addressed,” her handbook said.
Turning to the role governments must play the expert said this can be broken down into four categories:
(1.) A robust regulatory framework (that includes strategy, policies, a modern legal framework) which is consistent with national goals and international best practice. This provides clear direction to investors and the public on the government’s expectations for the sector and the “rules” under which activities will be undertaken;
(2.) Effective regulatory oversight to ensure compliance with strategies, policies, laws and international best practice;
(3.) Effective management of the state’s commercial interests. This is where the government’s strategy is to have state participation (either via National Oil Company or other arrangements); and finally,
(4.) Effective revenue management to ensure that the government receives its fair share of revenues and prudent macroeconomic planning is adopted.
Since an FDP is the plan of how a company intends to develop petroleum resources belonging to the country, the handbook said it is to be expected that the government has an instrumental role in the FDP process to determine the most optimal means of developing the oil.
If these plans are not properly developed, the expert warned that it could lead to poor execution, resulting in environmental disasters, severe financial repercussions and reputational difficulties for the companies involved.
“It (government) should therefore be fully informed of all matters relating to how the country’s petroleum will be monetized,” the Commonwealth advisor stated.
HANDBOOK’S ORIGIN
The Commonwealth Secretariat, through the Oceans and Natural Resources Division, supports member countries in the sustainable development of their natural resources.
The Secretariat also works in collaboration with other organisations to deliver on its mandate. The New Producers Group (NPG or Group) is one such partnership. The NPG was established in 2012 by Chatham House, the Natural Resources Governance Institute, and the Commonwealth Secretariat.
The NPG’s aim is to achieve lasting and inclusive development outcomes in emerging producer countries and to help them prepare for a world beyond oil and gas. It is a network and community of practice bringing together over 30 countries (Guyana included) which are new to the oil and gas sector, and half of which are Commonwealth countries (CWC).
NPG activities are centred around holding Discussion Meetings, including the Annual Meeting, National Seminars, publications which are focused on issues pertinent to emerging producers, and capacity-building initiatives (e.g. training, mentoring, technical teleconferences, workshops and webinars).
At the 2019 NPG Annual Meeting, government officials identified Field Development Plans (FDP) as an area where support was needed. In response, the NPG conducted a seven-day training workshop during October 2020 on “Government Review and Approval of Field Development Plans” which was attended by almost 100 officials from 11 countries. In 2021, the Group has facilitated several countries to develop internal government processes which enable the effective review of FDPs.
To complement the foregoing, the handbook was prepared by the Commonwealth Secretariat to address key challenges faced by regulatory bodies in member countries in reviewing, approving (and monitoring the implementation of) FDPs.
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