Template for best practice PSA for oil sector completed

─ PSAs will be “a balancing act” that will address what Guyana wants while attracting potential investments in the sector – DOE Director

─ department currently conducting a Legal Review and Gap Analysis of existing legislation governing the sector

DPI, Guyana, Tuesday, February 12, 2019

The Department of Energy has completed the development of a new template for Best Practice Production Sharing Agreements (PSAs) for Guyana in preparation for more investments in the oil and gas industry.

This was announced by Director of the Department of Energy, Dr. Mark Bynoe at a press briefing on Monday, at the Ministry of the Presidency.

Dr. Bynoe explained that the PSAs will be “a balancing act” that will address what Guyana wants while attracting potential investments in the sector.

He emphasised that “it’s a template, meaning that there will be differing conditions depending on how we are engaging. It is not a bilateral negotiation, but as the word implies as a best practice template, it would be the best practice for Guyana, but if all of those requirements are to be enforced, we would have the best PSA, but not very many investors… so it will always be a balancing act.”

The department has also developed a PSA model toolkit to allow “probabilistic scenario models of the current PSAs and the development of a new model contract,” Dr. Bynoe added.

He explained that “this tool kit, helps us to design future licensing around strategy by varying the assumption under which those strategies or the contracts will be developed, defining the approach for deep water, shallow water and onshore licensing together with modelling PSAs that will be offered. The modus operandi for issuing blocks in that particular PSA will be based on interest shown.”

Oil and Gas Advisor to the Ministry of the Presidency, Matthew Wilks said that the ultimate intention of the new model is to craft PSAs that could be applied to different investment climates.

“What we are trying to get to is a document that has a very small number of biddable terms because remember we want to go to competitive tendering, so it’s going to be a competitive environment.”

The director also gave assurances that the government will honour the sanctity of existing contracts it has with oil companies.

He added that that the government will not be discussing contract remediation with operators; however, it will continue to engage with ExxonMobil and other operators to ensure that Guyana receives the maximum possible value proposition from the resources and basis of the contracts it has signed.

Additionally, the department is in the process of conducting a Legal Review and Gap Analysis of existing legislation governing the Oil and Gas sector. This process is expected to be completed by the end of this month.

“That is because the primary legislation, the Exploration and Production Act of 1986 may have been suited for that purpose at that time, but given where we are in 2019, that legislation is badly in need for revision… for example; it is extremely silent on gas, and we do recognise that associated gas remains a significant discovery for Guyana going forward.”

This, he said, will then allow the department to move to the next phase of drafting, replacement or supplementary legislation.

This move is not just limited to the energy department, but all other subsidiary entities including the Maritime Administration (MARAD), the Civil Defense Commission (CDC), Environmental Protection Agency (EPA) and the Guyana Revenue Authority (GRA) which all need to look at the legislation and make the necessary amendments.

Synieka Thorne.

Images: Kawise Wishart.

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