17th November 2017 - Exploration managers flock to Georgetown technical conference — while anxieties rise over how country will cope with huge influx in revenues
The excitement generated in Guyana by ExxonMobil’s giant Liza discovery was in evidence last week when exploration managers from a host of companies packed out an AAPG technical conference on the deep-water exploration of the Colombus and Guyana basins in Georgetown.
Those attending would dearly love to emulate ExxonMobil’s success in finding the Liza trend.
However, they may also have noticed a tangible sense of anxiety among some Guyanans about how their their country will cope with an influx of revenues from powerful oil companies.
Guyana’s current regulatory framework is grounded upon the country’s outdated 1986 Petroleum Exploration and Production Act and, to help tackle this, the Commonwealth Secretariat is playing a consulting role in examining legislation as part of an upstream policy review.
Petroleum Commission
The Guyanan authorities have also been drawing up plans for a new regulatory agency, to be called the Petroleum Commission of Guyana.
These proposals are in select committee stage at the national assembly and will be reviewed by the Commonwealth Secretariat’s legal department later this month.
“We have received scores of memoranda because it seems that everyone has a view on what type of commission we should have,” Natural Resources Minister Raphael Trotman told Upstream.
“We started off with a remit to model the regulatory agency along the lines of other commissions in Guyana, but there has been a loud call for more autonomy," he said. “The government is carrying out its own review to see if we can accommodate some of these views.”
A new petroleum act will also seek to define rules on reservoir unitisation and there will be complementary regulations covering areas such as health and safety and environmental matters, Trotman added.
This draft regulatory framework is expected to go through more alterations before a final vote, but Trotman said he expects the law to be in place in the first quarter of 2018.
Guyana’s government has been working with an international consultant specialising in local content with the aim of coming up with a draft policy proposal by the end of the year. These consultations have thrown up the idea that Brazil’s experiment with highly prescriptive local content did not work, yet Trotman acknowledges there are still a lot of calls in Guyana for some kind of percentages to apply.
“Obviously we would like to see as many Guyanans involved as possible, but we need to foster training and manage expectations. Many Guyanans think they have a right to jobs, but not everyone can put on a pair of overalls and work on an FPSO,” Trotman said. "Government figures suggest Guyana will be raking in $300 million per annumrom the first phase of Liza alone, which Trotman describes as a “huge amount of money.”
Responding to this, Guyana’s government has drafted legislation for a sovereign wealth fund, an initiative being led by the Ministry of Finance in consultation with the IMF and the World Bank.
“We will have an Act before the start of production in 2020,” Trotman said, declining to comment on the amount of money involved.
“Many have recommended the Norwegian model, which puts the overwhelming majority into savings. This model undoubtedly has some very admirable features but I think we should craft something that is uniquely suited to Guyana, which is a developing country with a deficiency in infrastructure and also on the social welfare side of things,” he added.
Guyana President David Granger’s administration also hopes to use the boom in oil revenues to provide leverage for the development of Guyana’s interior, including paving the long jungle and savannah road to the Brazilian border.
“We see the future of Guyana as the development of our hinterlands. As we create roads, new communities, hospitals and schools will necessarily follow, Trotman said. “Obviously we will have to weigh development against preservation, as the beauty of this region is in the pristine state of its environment.”
Guyana has also been trying to attain full membership of the Extractive Industries Transparency Initiative (EITI), which is potentially at odds with non-disclosure of the terms of the ExxonMobil Stabroek block contract.
Dominant position
Being in such a dominant position on a block that spans 26,800 square kilometres and seems to hold all the best prospects on this trend, ExxonMobil is in no rush to disclose any information that could help competitors.
The original Stabroek contract, dating back to 1999 was in the public domain, but re-negotations after a period of force majeure were not disclosed.
Upstream understands the first exploration period was extended to four years, with two additional periods of up to three years each, but acreage percentages for relinquishment were settled at the time of negotiating.
“All of us in government wish to have everything in the public domain and we are being advised by foreign consultants and experts on this. We expect all contracts, not just ExxonMobil’s, to be public by the end of 2018,” Trotman said.
The recent decision by US President Donald Trump’s administration’s to withdraw from the EITI has not changed Guyana’s position on transparency, Trotman added.
As for new licensing, Guyana is considering a move away from a policy of maintaining an open door and negotiating areas individually.
“We are currently considering whether to have a hybrid of that, with some competitive bidding and negotiations, or perhaps wholly based competitive bidding,” Trotman said. The Garner administration has refrained from issuing new licences since taking office in 2015, preferring to focus on the regulatory review.
The one exception so far was the Orinduik offshore area licensed to Tullow, but all the groundwork for that was done during the previous administration.
“We are in no rush to go out and look for new operators. Opting for slow, cautious development with a few critical partners suits a nation of our size and relative development more than chasing a proliferation of operators to bring in as much money as possible,” Trotman said.