Guyana Oil Production Sharing Agreement

Parker stressed the importance of contractual healing in the nascent game, adding that 80% of Guyana`s resources are still in the discovery phase and do not yet need to be sanctioned to enter production. Irfaan Ali, a member of the Progressive People`s Party that defies Granger for the presidency, has repeatedly criticized the terms of existing treaties on the sharing of oil production and said most of them need to be reviewed. The upcoming presidential elections have raised concerns about agreements on the sharing of Guyana`s oil production with some of the world`s largest oil companies and whether new trade conditions could be implemented if the current government is impeached, analysts said. I think Guyana should not have ventured into oil production until there was a policy that blocks progress. The potential collapse of oil wealth led to Guyani`s political instability. The country`s president, David Granger, won a surprise victory in May 2015, just weeks before the discovery of Liza-1. When it became clear that the country would become a major oil producer, opposing politicians and other citizens began to question the terms of Exxon Mobil`s production-sharing agreement, which allows the oil group to recover its expenses before sharing 50/50 profits with the Guyanese government. In December 2018, President Granger lost a vote of no confidence in the government, and no date has been set for new elections. The controversy over the 2016 contract does not end there. According to an analysis of the agreement reached by Rystad Energy AS, an Oslo-based consulting firm, Guyana earned about 60% of oil profits, with the rest going to Exxon, Hess and Cnooc.

Meanwhile, Guyana, like many underdeveloped countries with oil, has no experience and few resources to manage taxation, regulation and environmental control related to large-scale energy production. The government has proposed the creation of a sovereign wealth fund like Norway for « transformation projects that will benefit future generations. » Significant infrastructure investments are also needed to support offshore activities, including processing facilities, an oil services base and a potential deep-water port. In addition, a power plant has been proposed, as well as a pipeline, to transport gas out of the Liza field for refuelling. However, all these initiatives are blocked until the impasse between the country`s executives and legislative powers is resolved. Where production of Stabroek block is underway, when a crude oil tanker arrived in Guyana on February 13 to lift the country`s first 1-million barrels of crude oil claiming land from Liza, said the head of Guyana`s energy department. The latest increase in crude oil was the third of Liza Phase One`s development since oil production began on December 20, 2019. Shell Western Supply – Trading Ltd., a subsidiary of Royal Dutch Shell PLC, has, according to the Guyanese government, won the offer to purchase guyana`s first three crude oil elevators. A recent OpenOil analysis of the treaty suggests that « Guiana will receive up to $55 billion less than should be the case with the Stabroek licence; $1.3 billion a year on average. In response to the Open Oil report, Exxon noted that « the findings are misleading because they compare Guyana`s deep waters to those of mature hydrocarbon producing provinces, which naturally reflect fiscal conditions that reflect maturity and lower risk profiles. » The government said the agreement was not only about tax conditions, but also about « geopolitical and national security constraints that cannot be ignored. » In July 2016, ExxonMobil added an area east of the Straboek block to the waters of Surinam.

Leave a Comments