…has Stability Clause not unlike other PSAs released

THE Production Sharing Agreement for the Orinduik Block offshore Guyana – released yesterday – takes a different approach to profit-sharing from the other agreements hitherto released. This time, there is a graduated ratio of profit-sharing based on the level of production achieved.

The agreement was signed on January 14, 2016, by Minister of Natural Resources Raphael Trotman representing the Government of the Cooperative Republic of Guyana and the joint-venture partnership of Tullow Guyana B.V. and Eco (Atlantic) Guyana Inc.

The agreement said that for the first 25,000 barrels per day of production, the profit-share shall be 50 percent for Guyana and 50 percent for the operator. If this production goes up by 25,000 barrels per day, the ratio will be 52.5/47.5 in favour of government. If the production goes up by a further 15,000 barrels per day, the split will be 55/45 in favour of government. If production goes up a further 15,000 barrels per day, the split will be 57.5/42.5 in favour of government. Should production reach 80,000 barrels per day, the ratio will be 60/40 in government’s favour.

With respect to income derived from oil production, transaction undertaken, activities performed or property held, the joint venture and its affiliate companies are free from tax, value-added tax, duty, fee, charge or other imposts.
Royalty as in all of the released contracts except ExxonMobil is in the order of 1 percent, payable by the government from its share of profits.

Consistent with the 2012 model PSA, the Tullow/Eco (Atlantic) agreement features a Stabilisation Clause which says inter alia that the government shall not amend, modify, rescind, terminate, declare invalid or unenforceable, require renegotiation of, compel replacement or substitution, or otherwise seek to avoid, alter, or limit this agreement without the prior consent of the contractor. It stated too that the government shall not increase the economic burdens of the contractor under the agreement by applying any increase of, or new petroleum-related fiscal obligation, including taxes, royalty, fees, charges, value-added tax and other imposts.
This PSA has no provision for a signing bonus.