Government has decided against forming National Oil and Gas Company -VP Jagdeo

Vice President Jagdeo also announced that in keeping with an earlier commitment, the Government is in the process of updating the Model Production Sharing Agreement (PSA) to allow for greater benefits when compared to the PSA signed by ExxonMobil for the Stabroek Block.

Government has decided against forming National Oil and Gas Company -VP Jagdeo

In updating the International Energy Conference on developments within the local Petroleum Sector, Vice President Bharrat Jagdeo announced that the Government has decided against using the remaining blocks to form a National Oil and Gas Company, and that is due to lack of funding.

Instead, the Government will be putting the 14 blocks up for auction.

He explained that a maximum of three blocks will be awarded to an investor or investment group to allow for exploration activities to commence simultaneously.

Vice President Jagdeo also announced that in keeping with an earlier commitment, the Government is in the process of updating the Model Production Sharing Agreement (PSA) to allow for greater benefits when compared to the PSA signed by ExxonMobil for the Stabroek Block.

“We had 10 contracts that were signed that had the old fiscal terms. We have now changed that; the royalty rate has moved from 2% to 10%. There was no corporate tax, now you have a 10% corporate tax, 75% went to cost recovery, 25% In a period before the investment had been paid off, and 25% would be distributed, now we’ve capped that off at 65%. We said there was a need for ring fencing but given the size of the future blocks, we decided against ring fencing because there’s small,” the Vice President explained.

According to Mr. Jagdeo, the new fiscal terms would be applicable to the contracts that were signed in the past with the exception of the one signed by ExxonMobil for the Stabroek Block.

The decision, he said, has not found favour with Exxon.

“We had a discussion with Exxon because they have invested in some of these blocks too, the Canje and the Kaieteur Blocks and they were not pleased with the new fiscal terms but we said this in opposition, that that’s what we’re going to do, and we did it openly, transparently, and now, all of the new players, anyone moving to production in the future in Guyana would have to comply with these new terms,” the Vice President said.

The Vice President said even with the new fiscal terms, which may appear a bit high, the country will still remain one of the most competitive jurisdictions in the world. He assured that the terms will not be a deterrent to new investments.

He said in addition to the new PSA, the Government is looking to have in place a new Petroleum Act by the second quarter of this year.

Meanwhile, in addition to the 14 oil blocks currently up for auction, the Government of Guyana is in talks with Brazil, Qatar and India among other countries about oil exploration offshore Guyana. 

“We still have remaining, some areas where we hope to work through bilateral arrangements with the Governments of Brazil, Qatar, and India,” the Vice President said while noting that Kuwait is among countries that have expressed an interest in oil exploration offshore Guyana.

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