Guyana Vice President Dr. Bharrat Jagdeo recently explained that the government does not want oil companies to sit on blocks for years without executing their work commitments. This has informed proposed changes to the country’s oil law.
Among the mechanisms proposed to ensure companies meet their obligations is a performance guarantee that they have to pay to the government if they are found to be in breach.
Describing the status quo, Jagdeo said a company can take a block and hold it, then just give back after wasting years.
“The country loses because we have had no investment in exploring or anything else. So, now you have to commit to do a drilling programme and establish a dollar value. And if you don’t pursue that, you have to pay the government a huge penalty for not doing that – massive penalties,” Jagdeo stated.
With respect to companies’ fulfilling their obligations, the Petroleum Activities Bill would work in unison with the model petroleum agreements the government is working to finalise. Those agreements set a stricter path to a final investment decision (FID) by oil companies, than the current disposition.
The government is seeking to encourage international oil companies (IOCs) to commit to development of commercial discoveries in a timely manner. The newly proposed framework would set stringent timelines on development decisions, with multiple intervals for companies to give assurances, once it has made a discovery.
When asked if the new regime would be too punitive, Jagdeo said, “We don’t want to make it onerous and throw people in jail, but they have to comply with our laws.”
Recently, CGX Energy had to give up too blocks offshore Guyana because it couldn’t come up with the funds to drill required wells. The relinquishment of the blocks had to be done, even after the government had granted extensions to the company. Jagdeo had said it’s not the government’s business if CGX can’t find the money. CGX has since decided to focus its energies on the potential of the northern Corentyne area, where it has made two discoveries of oil and gas.
Government has opened a period for public comments on the Petroleum Activities Bill, set to conclude on July 3, 2023.
