Management Themes (Part 5) introduced our discussions of matters pertaining to the development and production of a petroleum discovery. We began our review with the critical requirements for a Petroleum Production Licence (PPL) – the Application and the accompanying Field Development Plan (FDP). We saw that companies that did not make a discovery may, in certain cases, be invited by the Minister to make an application for a PPL through a competitive tender or a direct negotiation process. However, in all cases, a PPL application must be accompanied by an FDP which provides the details regarding the construction, establishment and operation of all facilities for the development and production of petroleum.
The FDP, in essence, represents all of the activities required for which the PPL is being sought, and it must give ‘an account of resource related, reservoir engineering, development concept, production facilities, socio-economic, technical, environmental and safety related aspects of the development, and any other requirement under the Act’ (section 2 of the Petroleum Activities Act (PAA)). We saw that this account includes Guyanese local content in the form of employment and training, and the goods and services required for the production and processing operations which can be obtained in Guyana.
In this publication, we continue our review of the FDP in the PPL application process and look at the provisions governing the grant of a PPL.
Management Theme – Maximising Access to Petroleum Resources
Development and Production
Matters pertaining to the development and production of a discovery are addressed in Part IV, sections 32 to 40 of the Petroleum Activities Act 2023 (PAA).
The Petroleum Production Licence (cont’d)
- The Field Development Plan
Regulation 15 of the Petroleum Regulations, 1986 (saved under section 98 of the PAA), also provides that the Minister may dispense with or modify any of the requirements under Regulation 15 (1) (discussed in Management Themes part 5) on the ground that the requirement has already been met by the applicant or the information relating to that requirement is already in the possession of the Minister. However, this is only at the Minister’s discretion and is not a requirement.
- Grant of Petroleum Production Licence
Section 33 of the PAA provides that the Minister may grant the PPL on such conditions as the Minister determines are necessary to give effect to the PAA. The grant of a PPL therefore takes into account the holistic requirements of the PAA and section 33 ensures that there is scope to take this into account when granting a PPL.
The PAA and the Regulations also contain provisions to ensure that (1) a PPL is not granted unless the application is able and willing to comply with the PPL conditions (PAA section 34), and (2) the conditions may be modified by the Minister from time to time as required (Regulation18).
Further, the PAA provides specific terms which must be satisfied prior to a grant. These are set out in section 34(1) (Restrictions on grant of petroleum production licence) which states that a PPL shall not be granted to an applicant unless –
(a) the FDP ensures the most efficient development, production and beneficial use of the commercial discovery;
(b) the applicant has adequate financial resources, technical and industrial competence and experience to carry on effective production operations;
(c) the applicant is able and willing to comply with the conditions on which the licence is proposed to be granted;
(d) the plans of the applicant for local content are in compliance with the Local Content Act;
(e) the exercise of any option given to the State under section 19(4) are complied with to the satisfaction of the Minister;
(f) the FDP takes into account best international industry standards and practices; and
(g) where the applicant is in default, the Minister determines that special circumstances exist which justify the granting of the licence notwithstanding the default.
Expanding briefly on terms (e), (f) and (g) –
- Term (e): Section 19(4) provides for petroleum exploration licence to contain terms with respect to the State having the right to exercise an option to acquire an interest in a PPL. These terms would have to be complied with by an applicant at the time of entering the development of production phase of operations and the grant of a PPL.
- Term (f): ‘best international industry standards and practices’ is defined in section (2) of the PAA as meaning – all those uses and practices that are, at the time in question, in accordance with the most up to date international standards that are generally accepted in the international oil and gas industry as being state-of-the-art or otherwise appropriate to the operations in question, safe, economical, environmentally sound and efficient in exploring for, developing, producing, processing and transporting petroleum.
- Term (g): The Minister may or may not determine that circumstances exist which justify the granting of the licence notwithstanding the default. Additionally, section 5 (2) of the PAA, which provides for ‘the powers and duties of the Minister’, states that the Minister, in the exercise of the powers and the performance of the duties of the Minister shall conform with any general or specific directions given to the Minister by the Cabinet.
In our next publication, we will conclude our discussions under the Management Theme ‘Maximising Access to Petroleum Resources’, including a review of the PAA’s Unitisation provisions.
DISCLAIMER: This series is not intended to serve as a replacement for the Petroleum Activities Act 17 of 2023, nor is it a substitute for legal or other professional advice in any manner whatsoever.
