As Guyana nears a decision on whether to form a national oil company (NOC), it is looking to mitigate risks historically associated with some NOCs such as corruption. To this end, government wants to ensure it does not create an ‘old style’ NOC.
The topic of whether Guyana should establish a NOC has sparked much public debate, including the concern about corruption, and this has been welcomed by the government.
The issue of corruption was also raised by America’s Market Intelligence (AMI) analyst, Arthur Deakin, who pointed to examples in neighboring countries like Brazil, Suriname and Venezuela.
Vice President Dr. Bharrat Jagdeo said on Monday that the risks and concerns associated with a NOC are currently being assessed, as the country gears up to auction off its oil blocks in a few months’ time.
He told the press on Monday that the topic is being “carefully considered”, noting that there appear to be more cons than pros with a state-owned oil company.
NOC can guarantee far greater benefit, value to Guyana – Financial Analyst | OilNOW
“We are getting a list of concerns that are universally known regarding the establishment of a NOC,” he stated. “And from our own and what we looked at, we believe that having an old-styled model for a national oil company could present major difficulties.”
Furthermore, with the world’s net-zero target, Dr. Jagdeo pointed out that finding funding globally becomes a hard task and with only one strategic partner, it could lead to slowed production, going against Guyana’s oil mandate.
“So, the model that we are talking about is not an old-style NOC, it is about a passive ownership of shares in the company in exchange for some of the offshore blocks that we will allocate. We would just simply say we are getting a strategic partner, get a share, and have no control of operation or management, except what is given by virtue of ownership,” he explained.
Other concerns include the time needed to develop the NOC, since Guyana is pursuing the rapid development of its oil and gas resources; and the pressure on the country’s domestic capacity.
According to the Vice President, a modified Production Sharing Agreement (PSA) – the revenue-earning terms therein – would be instrumental to the decision about whether Guyana establishes a NOC.
“… because a modified PSA would give us a greater share of the revenues from oil production.”
A final determination on whether Guyana will establish a NOC is expected in September.
Already, investors from the Middle East have signalled interest in becoming strategic partners and Arthur Deakin believes that partnering with Middle Eastern oil giant Saudi Aramco offers significant upside, although still presenting some notable risks.
Deakin had also said that Saudi Aramco’s strong ties with the government and its recently awarded one-year contract to market Guyana’s oil make it the leading candidate.
