Response to Kaieteur News
The Ministry of Natural Resources takes this opportunity to respond to the Kaieteur News article, headlined ‘New PSA mirrors Stabroek Block blunder’ (November 21, 2025). In this article, the newspaper claims the Government has left a loophole in a newly awarded petroleum agreement, that would allow TotalEnergies, Qatar Energy and Petronas to recover royalties owed to Guyana if they discover and produce oil and gas offshore at Block S4.
We appreciate the continued interest of Kaieteur News, even though the conclusion reached was inaccurate and uninformed. In the petroleum industry, it is widely understood that royalty payments on petroleum produced and sold are generally not cost recoverable. The exception to this rule occurs only in petroleum agreements, where the cost recovery of royalty payments is explicitly stated.
Recoverable contract costs are those expenses incurred in carrying out petroleum operations and can only be recovered from cost oil. This recoverable cost is deducted from the value of crude oil and/or natural gas produced and sold from the contract area. As outlined in Article 35.2 of the Agreement, the term cost oil is defined and provides the basis for the recovery of these costs.
Petroleum Operations being defined in the Petroleum Activities Act of 2023 as “exploration operations, appraisal, development and production operations or any combination of two or more of such operations, including construction, operation and maintenance of all necessary facilities, plugging and abandonment of wells, safety, environmental protection, transportation, storage, sale or disposition of petroleum to the delivery point, site restoration and any or all other incidental operations or activities as may be necessary and required”.
The fundamental reason why royalty is not recoverable is that it is a payment based on production, rather than on profits. Royalties are paid before the allocation of production between Cost Oil and Profit Oil, which excludes royalty payments from being considered recoverable costs. In other words, royalties are a fiscal obligation owed to the state, not an operational expense incurred in carrying out petroleum operations. As such, unless expressly included in the Petroleum Agreement, royalty payments cannot be recovered as part of the Contractor’s costs.
Royalty is effectively a share of petroleum produced, paid primarily as compensation for the depletion of the country’s natural resources. Since royalty is taken from production before the calculation of Cost Oil and Profit Oil, it cannot be considered recoverable under standard provisions.
For further clarification, Section 3.1 of Annex C of the Block S4 Petroleum Agreement lists costs that are recoverable without requiring additional approval from the Minister, often referred to as costs recoverable “as of right”. These recoverable costs, while subject to audit, fall under broad categories such as Exploration Costs, Development Costs, Operating Costs, Service Costs, and General and Administrative Costs. Notably, royalty is not included in these categories and is not deemed recoverable under the standard terms of the Petroleum Agreement.
In the context of Guyana’s recent oil production history, it’s worth noting that in 2019, as the country was new to petroleum production, there was some uncertainty surrounding the status of royalty payments and their recoverability. To resolve this ambiguity, an addendum was included in the Petroleum Agreement for “the avoidance of all doubt”, clarifying the issue. Since then, with the accumulation of experience in oil and gas operations, the status of royalty payments has become clear, and it is now understood that royalty payments are not recoverable unless expressly stated otherwise in the agreement.
We are pleased that, after the review conducted by KN, the only concern identified was an issue that, as it turns out, is nonexistent. We also appreciate the acknowledgement that all other differences related to the 2016 Petroleum Agreement have been resolved in this iteration of the PA.
The oil and gas sector continues to grow and evolve, with learnings available everyday, providing fresh content for new and interesting stories that can benefit Guyanese readers. With Google’s help and a few idle minutes, any reader would discover that Kaieteur News’ reporting on oil and gas today is void of recent learning, and is simply a regurgitation of the same handful of issues it has harped on for many years. There is little to no originality; just laziness and repetition, despite the Government’s continued provision of explicit explanations and corrections.
The Ministry of Natural Resources will always provide timely and comprehensive updates where its management of the oil and gas sector is concerned, for the benefit of all Guyanese.