Today we turn our attention to how the country, and more particularly the PPP/C Government and the APNU+AFC Coalition Government have managed the country’s potential and discovered petroleum resource. In 1939, the legislature passed the Petroleum (Production) Act vesting in the Her Majesty the property in any and all petroleum and natural gas within Guyana and made provision for their exploration and exploitation.
Despite later and substantial amendments to the petroleum laws, the ownership of the state in all petroleum has been the essence and foundation of our petroleum legislation now contained in the in the Petroleum (Production) Act and the Petroleum (Exploration and Production) Act Cap. 65:04.
What this means is that any discussion on petroleum matters ought at this point to be discussed against the backdrop of the existing two Acts and Regulations 5 of 1986.
It is on this score that I have some problem with the experts from overseas invited to Guyana and who make all forms of statements, some of which seem meant to shock rather than inform and discuss. Of course we welcome their expertise and their superior knowledge and experience. But the least they must do is try to understand the relevant legislation before making any unfounded or uninformed statements. Oil companies do in fact have a pretty bad reputation for dealing with national governments, a reputation that is not entirely undeserved.
Those companies know however that there is a section of the media which is not unwilling to speak out against these companies. They also have a stock market to contend with and investors who are not averse to pulling their investments when oil companies act dishonourably.
Oil and ethics
That is not at all to suggest that these companies will always act in an ethical manner and it is therefore important that governments, civil society and individuals are ever vigilant about the conduct of oil companies. In that regard, the efforts of the Guyana Oil and Gas Association (GOGA) and the Ministry of Natural Resources in having persons – local and overseas – provide guidance and information on how to relate to oil companies is welcome. But the benefit of their contribution increases in sync with their understanding of the country’s petroleum and related laws.
They need not be experts in petroleum law but unless they understand the nature of the oil contract which Guyana has accepted as the preferred model of agreement what is referred to as a production sharing agreement, reference to which is made in section 51 of the 1986 Act. Other models include Joint ventures, License Agreement, Concession Agreement and Petroleum Sharing Agreement. Each of these has its strengths and weaknesses and risks and rewards. Some countries in fact, such as Brazil and Trinidad and Tobago have gone the route of national ownership which is great when in the profitable cycle of the industry but can pose real difficulties when cost of production exceeds the international price for the product.
Of course Guyana is only stuck with the production sharing agreements in respect of Prospecting Agreements which have already been signed since these have what are effectively two stabilisation clauses, one of which states that the provision of the prospecting licence relating to any petroleum production licence shall be read as part of the provisions of the production licence. The other clause is more explicit and iron clad preventing the government from any unilateral increase of the oil company’s obligations or the diminution of its rights. It contains a government guarantee that if any subsequent amendments are made in the laws, orders or regulations adversely affecting the oil company, the government and the oil company will promptly make revisions and amendments to the agreement effectively restoring the oil company’s rights and limiting its obligations. For now we have to use the laws and the agreements we have and manage and monitor the companies and the government in equal measure.
Inaction on disclosure and appointments
We should start with disclosure of the petroleum agreements which our elected representatives sign on behalf of the state and the people. How can we monitor the parties to the agreement if we do not have copies of those agreements? As far as I know only one political party, a member of the Coalition, has called for the petroleum agreements to be made public. It needs to do more. We cannot let the government believe that this is acceptable. It is not, not by any stretch.
Finally in this column, a key requirement of the Petroleum Act has been ignored for at least twenty years. There is a requirement that the Minister must designate a public officer or any employee of the Guyana Geology and Mines Commission as Chief Inspector and such number of public officers or employees of that Commission, as may be considered necessary for the purposes of this Act, as Inspectors. Such appointments are required to be published in the Official Gazette, My research shows that the last person who was so appointed was Mr. Brian Sucre who died several years ago.
In next week’s column the importance of those appointments will be highlighted.