— new model PSA being developed, says VP Jagdeo
Vice-President, Dr. Bharrat Jagdeo, on Tuesday, said that the auction for the remaining oil blocks will be launched by the end of September and the process is expected to conclude in early 2023.
He made the announcement during a special edition of the Glenn Lall Show, during which he also noted that the government is working on a model for future Production Sharing Agreement (PSA).
“We have to now have a new PSA to tell people what they’re going to get if they come in on this auction,” Dr. Jagdeo said, pointing out that the new PSA will utilise three variables.
The first of the three variables involves the company’s legitimate expectation, that is, if they invest money, they should get a decent return on the investment.
The second is keeping in the new PSA enough incentives that will accelerate exploration and production and the third speaks to greater share of the benefits for the government.
“So, we’re currently working on the discussion paper that would have to be completed soon as part of the auction,” the Vice-President said.
The government, he said, has also started to study the spectrum in relation to the takes by other oil and gas-producing countries.
He noted that some countries are on the lower end while countries like Norway and others can get as much as 75 per cent of the total take compared to Guyana, which is currently getting just over 50 per cent.
“Moving to a higher point will be determined by those variables, how we settle those variables and then through a combination of adjustments on royalty, maybe profit sharing and the taxes we will achieve that,” he expressed.
Elaborating on this point, he said that if the country wants 52 per cent or 60 per cent of the proceeds, each variable can be adjusted. He added that the royalty can be kept at two per cent for example, or higher royalties could be taken.
Another adjustment that can be made, he said, is in the taxes, to either have them increased or lowered to achieve the same purpose of the country having a higher take.
Late last month, the Vice-President, at a press conference, stated that the government was working out the fiscal terms that will ensure Guyana gets the best deal in the sale of the remaining oil blocks.
A number of factors were at the time being worked out which included whether the government will keep some of the oil blocks to form a national oil company, how the government will divide the blocks and whether or not existing companies in Guyana will be allowed to participate in the auction.
At that time, he mentioned that the technical work is being done so as to ensure that when the auction is launched, the country receives maximum benefits.