Guyana says it will use a US$20M loan approved by the World Bank for capacity building initiatives ahead of first oil in 2020.These include finalizing critical legislation and the establishment of critical units, such as a Petroleum Revenue Unit at the Guyana Revenue Authority, among others.
The South American nation’s Finance Minister, Winston Jordan, disclosed these details on Friday, while addressing members of the Guyanese media corps and fielding questions on his Ministry’s preparation for oil and gas.
“We have a loan coming up from the World Bank, I think about US$20M for oil and gas development,” he divulged.
According to the Minister, some of that money will be going towards preparing and finalizing various pieces of legislative instruments relative to the sector “that will be required to be put in place.”
He said the capacity building is meant to improve the legislative and other architectural frameworks which will govern the O&G sector.
Mr. Jordan conceded, “except for the existing piece of legislation, we have no direct legislation like local content, the SWF (Sovereign Wealth Fund), the petroleum commission, the petroleum fiscal regime; all these different pieces of legislation,” he said.
Speaking to the paucity of legal draftsmen available locally, Mr. Jordan revealed that a portion of the loan will also be used to bring in international experts.
The country’s petroleum fiscal regime is governed by the Petroleum (Exploration and Production) Act 1986 (PEPA), the Petroleum (Exploration and Production) Regulations 1986, as well as other tax laws and sector regulations.
A recent study done by the International Monetary Fund (IMF) on Guyana’s preparedness for the emerging sector found the country’s Petroleum Laws were enacted at a time when there was little information about the geological prospects in the country; but given the de-risking of the basin following recent discoveries and the growing interest of international oil companies in the sector, the authorities should consider reforming and modernizing the legal and fiscal framework for new investments in the sector.
According to the IMF, Guyana’s legislative framework is highly discretionary, leaving key fiscal terms to be defined in PSAs, and lacks provisions for activities other than exploration and production.
While PEPA provides for exploration and production activities, the Act and regulations are mostly silent on the processing and refining of petroleum products, pipelines and other modes of petroleum transportation, and petroleum marketing arrangements.
This, since the laws framing Guyana’s petroleum fiscal regime date back to the 1980s and “the authorities were probably interested in attracting investment in exploration activities.”
In its recommendations to the Guyana Government’s request for assistance, the IMF suggested the decades old laws be updated ahead of new investments.