Introduction
Following on several readers’ queries, perhaps I should indicate that I am by no means singular when treating cost recovery as a central component of the fiscal regime of petroleum producing countries. Presently, this is the standard formulation used by both “mainstream” and “critical” theorists. The reason why this has come about is simply that global practice has revealed clearly cost recovery provisions in petroleum contracts do not only impact the financial/economic bottom lines of petroleum contracting operators. They also affect governments that hold production sharing contracts (PSCs). The same outcome is, therefore, confidently expected to unfold within Guyana, after the much anticipated commercial operations start in 2020.
Having made this observation, it is necessary as well to acknowledge that, in practice, there are significant variations in cost recovery provisions among countries. Professionals who have studied these contracts advise that such variations could include, but are not limited to, variations in 1) those costs treated as legally recoverable; 2) the order of priority/scheduling indicated for recoverable cost claims, especially capital spending; 3) the ceiling set on cost recovery (in Guyana’s case 75 per cent); 4) the carry-forward provisions for cost recovery; and 5) allowances, which the contract permits.
