Management Themes (Part 6) focused on the grant of a Petroleum Production Licence (PPL) under the Petroleum Activities Act 2023 (PAA). We saw that section 33 provides that the Minister may grant the PPL on such conditions as the Minister determines are necessary to give effect to the PAA, and that the grant of a PPL therefore takes into account the holistic requirements of the PAA.
We also highlighted the terms which must be satisfied by the applicant before a PPL can be granted by the Minister. These terms are set out in section 34 (1) of the PAA, and we expanded briefly on terms (e), (f) and (g). Term (e) deals with the State’s right to exercise an option to acquire an interest in a PPL, term (f) addresses ‘best international industry standards and practices’ which is defined in section 2 of the PAA and term (g) makes provision for a defaulting applicant to be granted a PPL only if the Minister determines that special circumstances exist. In relation to term (g), we also noted section 5(2) of the PAA, which states that the Minister, in the exercise of power and duties, shall conform with any directions given by the Cabinet.
The granting of a PPL creates a regulatory focus transition within the PAA and places the Licence Holder within a new licencing regime based on an approved Field Development Plan. We also saw that this Plan must comply with the Local Content Act. A PPL grant also brings the concept of Unitisation into our discussions. In this publication, we will conclude our review under the theme Maximising Access to Petroleum Resources with a look at the PPL and Unitisation provisions.
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)
- Contents of Petroleum Production Licence
Section 35 of the PAA speaks to certain matters which shall, or may, be contained in a PPL.
The PPL shall (i) state the date of the grant of the licence, (ii) identify the block to which the licence relates and (iii) state the conditions subject to which the licence is granted.
The PPL may include (i) such other matters as the Minister may determine for the purposes of the Act (ii) provisions relating to the duty of the Licence Holder to supply the petroleum to the extent stated in the licence, to meet the requirements of Guyana and (iii) conditions relating to the disposal or sale of petroleum recovered in the development and production area. The recovery and sale of petroleum is a critical transition point in the process of maximising petroleum resources. Earlier, we saw that section 33 of the PAA also provides that the Minister may grant the PPL on such conditions as the Minister determines are necessary to give effect to the PAA.
The recovery and sale of petroleum under a PPL is a critical transition point in the process of maximising petroleum resources.
- Rights conferred by Petroleum Production Licence
The PPL grants exclusive rights to the Licence Holder to (i) carry on development and production operations in the PPL area (ii) sell or otherwise dispose of petroleum recovered and (iii) carry on operations and execute works necessary for, or in connection with (i) and (ii) above. However, these exclusive rights are subject to the PAA, and the conditions set out in the PPL or the Petroleum Agreement (also called the Production Sharing Agreement) – section 36 of the PAA.
- Term of Petroleum Production Licence
A PPL for an oilfield can have a maximum term of thirty years, and for a natural gas field, a maximum term of forty years, inclusive of a renewal period.
Yellowtail Petroleum Production Begins
Unitisation
Matters pertaining to unitisation are addressed in Part VI of the Petroleum Activities Act 2023 (‘PAA’).
Part VI of the PAA makes provision for those instances which require the coordinated development and production of a petroleum reservoir as a single unit, where that reservoir extends beyond the boundaries of the exploration licence area (i) into the area of one or more exploration licences held by other Licence Holders within Guyana’s territory (section 44) or (ii) into the territory of a neighbouring State (section 45). In these circumstances, the coordinated development and production of the reservoir as a single unit is referred to as ‘unitisation’ under the PAA.
- Unitisation within Guyana’s Territory
Where the petroleum reservoir extends beyond the boundaries of the exploration licence area into the area of one or more exploration licences held by other Licence Holders within Guyana’s territory, the Minister may direct the holders of the respective licences to enter into a unitisation agreement for the coordinated development and production of the reservoir as a single unit. Section 44 also provides that the unitisation agreement shall not be approved where the Minister considers it to be inconsistent with the PAA, and failure by the holders of the respective licences to submit a unitisation agreement may result in the Minister establishing the terms and conditions under which the unitisation shall be conducted.
The Minister may direct the holders of the respective licences to enter into a unitisation agreement for the (i) purpose of ensuring optimum recovery and development of the petroleum and (ii) protection of the economic interests of the State.
- Unitisation with Neighbouring States
Under section 45, where the petroleum reservoir extends beyond the boundaries of the exploration licence area, across Guyana’s borders and into the territory of a neighbouring State, the Minister (in consultation with Cabinet) may engage in discussions with the neighbouring State for the unitisation of the cross-border reservoir. A unitisation agreement is only possible if the Government of Guyana and the neighbouring State first enter into a cross-border unitisation treaty. In negotiating the treaty, the Government of Guyana, upon consultation with the Licence Holder, may make available information about the cross-border reservoir or geological structure that may be considered confidential under the PAA and the respective Petroleum Agreement. This information may only be made available to a limited extent and under a confidentiality agreement and it is intended to enable the determination of tract participation for the sharing of production from the reservoir.
In our next publication, we will take a closer look at the Decommissioning provisions contained in Part IX of the PAA, which we first reviewed briefly in the PAA Series: Management Themes (Part 1).
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.
