Non-Associated Gas in the Esso/Hess/CNOOC-Nexen Contract

Every Man, Woman and Child in Guyana Must Become Oil-Minded Part 45


After the major financial issue last week, we return today to the mundane issue of the provisions on non-associated gas in the 2016 Agreement which the three oil companies signed in June 2016. Those provisions are contained in Article 12.2 and have four paragraphs. Recall from Column 43 that non-Associated Gas is defined as “natural gas or gas other than associated gas”, i.e., gas derived from a reservoir producing predominantly crude oil.

It is probably necessary to reflect on Article 8 which embodies section 30 of the Act. That section requires notice to be given forthwith to the Minister of any discovery in the Contract and to inform him of the tests the Contractor proposes to run on the discovery and for the Contractor to submit test results to the Minister.

In its notification of the Discovery, the Contractor is required to inform the Minister whether s/he believes that such discovery is potentially commercial under the current Agreement terms, or if Contractor requires revised fiscal terms or contract terms under the Agreement to proceed with a Development Plan. It is unclear what revised fiscal terms the Contractor will require since all imports are duty and tax free and a range of income is either exempt from taxes, or better for the Contractor, is paid by the Government of Guyana. ….