Guyana’s approach to Production Sharing Agreements (PSAs) has been a key factor in its rapid oil sector development, despite public criticism, according to Janelle Persaud, Founder of Cacique Consulting.
“The PSA framework enabled the pace of development we see today,” Persaud said during a panel discussion at the Suriname Awareness Symposium. Persaud leveraged her media background and experience at ExxonMobil to share insights on the country’s journey.
Exxon is the operator of the Stabroek Block where over 11 billion barrels of oil equivalent resources have been found since 2015. The company has three developments running, producing over 650,000 barrels of oil per day (b/d) with three more expected by 2027, all under the Stabroek Block agreement granted to Exxon and its co-venturers Hess and CNOOC.
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Critics of the Stabroek Block PSA argue that Guyana’s share of revenues is insufficient and that other provisions unfairly favour the co-venturers.
The contract allows the co-venturers to recover costs up to a ceiling of 75% and splits the profits evenly, 50/50, between them and the government. The Guyanese government also collects a 2% royalty on petroleum produced and sold. It has assured the companies that it will uphold the contract. However, some local stakeholders continue to call for renegotiation.
Persaud acknowledged the public debate over the favorable terms of the initial PSAs for investors. “It wasn’t easy for the government to hear such feedback from its people,” she noted. However, she credited the government’s decision to honor the original agreements as essential to de-risking the sector and understanding the country’s resource potential.
“The importance of using the initial benefits from those investments to kickstart development cannot be overstated,” she explained. Persaud added that global energy transition pressures further underscored the urgency of efficient exploration and production.
To address public concerns, the government has introduced a new PSA template. “It gives the country more in future contracts with new licenses and partners,” she said. This balance reflects the importance of listening to citizens, learning from other countries, and adapting to global realities.
Persaud concluded, “Governments must strike a balance by listening to their people and finding common ground that works for them.”
The new PSA has a 10% royalty rate, up from the 2% in the Stabroek PSA. The 75% cost recovery ceiling in the Stabroek PSA has been lowered to 65% in the new model contract. The sharing of profits after cost recovery will remain 50/50 between the government and the co-venturers. Additionally, a corporate tax of 10% will be instituted, where there was none before.
