Parimarbo, Suriname – Jay Park, Managing Partner of Park Energy Advisory Ltd., has called for urgent reforms to petroleum fiscal regimes across South America to meet the competing demands of the energy transition, affordability, and energy security.
Speaking at the AIEN Masterclass on Global E&P Fiscal and Contractual Developments, a pre-summit event for the Suriname Energy, Oil and Gas Summit (SEOGS), Park opened with a reminder of the “energy trilemma.”
“We want to have a secure supply of [energy]…we want the environment to be adequately protected…[and] we also want to have it affordable,” Park said. “That is the challenge of our times.”
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Park questioned how countries should balance these priorities while transitioning to net zero. “Do we transition to net zero, or do we explore, develop and produce hydrocarbons? If you’re a minister of energy for the country, what do you do?”
He presented data from the International Energy Agency and Organization of the Petroleum Exporting Countries and ExxonMobil showing that even under aggressive decarbonization scenarios, the world will still require significant oil and gas production.
“Every one of these scenarios means we need more oil and gas than the no investment scenario,” Park emphasized. “The suggestion a few years ago from the IEA, ‘oh, we don’t need to invest in any oil and gas anymore’…the answer is, it is needed.”
He noted that gas followed a similar trajectory. “Gas is fundamentally the same,” he said, arguing that hydrocarbons remain vital to the global energy mix even under net zero pathways.
Turning to South America’s role in the global transition, Park said it could be “an exciting one,” offering opportunities to expand both oil and gas development and renewable energy. But he cautioned that fiscal competitiveness must improve.
“What we’ve discovered is that most South American petroleum regimes tax at a higher rate,” he said. “You can see states that go from as low as 35% government take, to as high as 95% government take. Where are you, and what is that government take right for the resource base that you have?”
Park warned that high tax regimes could deter investment, especially given the expectation that oil and gas prices will trend downward over the next two to three decades.
He also urged states to better tailor fiscal frameworks to the nature of their resource base. Using analogy, Park described how different petroleum types require unique policy “recipes.”
“Here’s what I call a petroleum cow,” Park said. “Light oil is the steak… But now most of the world’s oil is actually coming from non-conventional oil sands, coal bed methane, tight oil, deepwater, shale…that’s a different recipe.” By “recipe”, Park meant specific rules on tenure, fiscal terms, and environmental protections that differ based on the resource type.
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He argued that one-size-fits-all regimes are no longer appropriate. “Most states around the world have one kind of petroleum regime,” he said. “We eat the whole cow using different recipes.” Park identified complexity as another critical problem. Many current systems are over-engineered. “As we heard from Albert Einstein, everything should be made as simple as possible, but not simpler,” he said.
He concluded with a call to action for governments to lead in designing modern, effective regimes. “We need a healthy control oil and gas industry well into the future, even in our net zero scenario,” Park asserted.
“We need regimes in South America designed to meet the needs of South America,” he continued. “It’s the duty of the state to do this. Oil companies don’t do this. The state creates the football field and sets the rules.”
Park called for “an urgent international initiative to improve control regimes so they can create social wealth that we all need and will expect to have in the coming years.”
His presentation closed with optimism that this discussion would continue throughout the Suriname Summit.
