To briefly recap our first publication the Petroleum Activities Act Series – Introduction, the term upstream refers to all activities carried out in the exploration for, and production of petroleum. The terms exploration, development, and production found in the Petroleum Activities Act 17 of 2023 (PAA) are broad headings that describe these upstream activities. The PAA replaced the Petroleum (Exploration and Production) Act 1986 and provides the legal framework for the conduct, administration, and management of these upstream activities.
Management Themes – Ownership, Licencing, Environmental Management
Some of the key themes that provide legislative context and rules for the conduct and management of upstream petroleum activities in Guyana are outlined below.
Ownership of petroleum resources.
PAA section 3 – The property of petroleum existing in its natural condition in strata in the national territory is vested in the State. Simply put, ‘vested in the State’ means owned by Guyana, ‘in the national territory’ means in Guyana (land and waters), and ‘in strata’ means within the layers of Guyana’s earth, including earth found beneath the water, for example, the ocean bed or seabed. Petroleum is defined in the PAA to include naturally occurring gas, liquid or solid hydrocarbons, or mixtures of one or more of those, but excludes coal, shale, or any substance that may be extracted from coal or shale.
Licencing Framework
Licensing under the PAA has been expanded to include activities for petroleum transportation and storage operations. Specifically, section 6 of the PAA introduces two additional forms of licence and one permit – a pipeline operations licence, a geological storage licence for carbon dioxide, and a geological or geophysical survey permit. The two main forms of licence, the exploration licence and production licence, also remain.
The licencing framework is also updated to:
Allow only a company (or companies) incorporated or registered as an external company under the Guyana Companies Act Cap 89:01 to apply for a licence or permit. Only a company can hold a licence.
Allow the granting of exploration and production licences through direct negotiation only where the Minister, acting on the directions of Cabinet, determines that there are special circumstances for the licence to be granted in the interest of national security. Direct negotiation is only permissible in special circumstances where the granting of a licence is in the interest of national security.
Speak to licence application assessment and award criteria such as technical ability, financial resources, safety and environmental policies, previous performance in petroleum operations, and other commercial, climate, or social investment considerations. Provides more detail on licence application assessment and award criteria.
Grant of Licence under the Competitive Bid Process (section 5 and sections 7 to 14 of the PAA)
The Guyana government has set a target in its 2025 plan to issue two petroleum licenses | OilNOW
Environmental Management
The PAA has been updated to expressly include environmental management requirements in the conduct of petroleum activities. The Act particularly provides for the consideration of environmental matters in the process for the application and grant of licences, and the final stage of exploration or production operations. These final stage activities are referred to as decommissioning.
The consideration of environmental matters in the process for the application and grant of a licence is also related to a licence holder’s obligation to conduct decommissioning activities when required. During the life of a licence, small-scale decommissioning activities may also be required, for example, where wells may be required to be plugged (sealed) even as other petroleum operations continue under the licence.
Decommissioning is defined in the PAA as the process of ending petroleum operations, the temporary and permanent plugging of wells, and the removal, partial removal, or abandonment in place of wells, facilities, and assets used in the conduct of petroleum operations. These include pipelines, equipment, production and treatment facilities, electrical facilities, landing fields, telecommunication facilities, site restoration and remedial operations, and use, reuse, or relocation of petroleum infrastructure for alternative purposes.
The PAA also makes provision for regulations that can further expand on environmental management requirements.
In our next publication, we will finalise our exploration of key themes within the PAA’s framework that provide legislative context and rules for the conduct and management of upstream petroleum activities in Guyana.
DISCLAIMER: This series is not intended to serve as a replacement for the Petroleum Activities Act 17 of 2023 nor is it a substitute for legal or other professional advice in any manner whatsoever.
