In the introduction to this focus we referred to the right of a fair return defence of the petroleum agreement by President Ali, which marks a significant change by the Administration whose 2020 elections manifesto promoted renegotiation. Despite the valiant efforts of a number of well-meaning individuals and the campaign of Kaieteur News, the campaign for any renegotiation of the Petroleum Agreement appears to be going nowhere. That is unfortunate because it means Guyana is bound by it at least until 2056 and worse, that no change in any law can affect any of the three oil companies and the millions of acres for which they have sole control – akin to a state within a state.
Significantly, Global Witness, the international NGO, withdrew its 2020 Report which castigated the Granger Administration for its careless and incompetent negotiation of the 2016 Agreement. That was particularly disappointing to the critics of the Agreement leaving just a few dedicated persons to continue the struggle for a better deal.
The two extremes in the argument over the Agreement can probably be explained shortly. One side believes that in the interest of the environment, all exploration and production should cease. For purely legal and practical reasons that seems to be a nonstarter since it would mean that the country will face crippling economic and international sanctions. Then there seems to be the side that favours aggressive exploration and production, the equivalent of Drill baby Drill. Such a policy will require extreme skill in making it inconsistent with the renewal of the Low Carbon Development Strategy to which the Administration is wedded. The policy will have other inescapable implications.
We do not have the local labour, let alone the local expertise with a single well producing about 100,000 barrel of oil per day. It is a no brainer that it would be impossible to meet the demands when production goes up to 1,000,000 barrels per day. And that is not the only other challenge the country will have to oversome. Unless we set aside most of the money from the increased oil revenues, avoiding an overheating of the economy and the Dutch disease will be another impossibility to contend with.
What this might signal is that the Administration is committed to non-interference with an Agreement containing some obvious illegalities and a provision which bars the government and the Parliament from making and enforcing any laws not consistent with the Agreement. That turns the law on its head and extends a permanent tax holiday, at least to 2056 and allow the oil companies privileges akin to operating like a state within a state.
The PPP/C’s position is of course not helped by the fact that it parented the 2016 Agreement by way of the 2012 Model Agreement and was more than permissive not only with the preparation of the 1999 Agreement but also with its execution. So far, the Administration has missed many opportunities to rectify some of the wrongs of its predecessor and now is looking for local content arrangements apparently oblivious that both the governing Act and Regulations require oil companies to meet local content standards as a matter of law.
The Government has taken no step to restore the Petroleum Commission Bill (PCB) on the parliamentary agenda and has eschewed the Natural Resource Fund Act (NRFA). In our view, it had had enough time to replace those.
