VICE PRESIDENT, Dr. Bharrat Jagdeo, believes that there is need to strengthen the dispute resolution process through which Guyana would appeal for unjustified cost oil expenses to be disallowed and returned to profit oil.

This would most likely be addressed in the new Production Sharing Agreements (PSA).

Speaking at a press conference on Thursday last, Dr. Jagdeo noted that any eventuality of a deadlock between the government and oil operators on disputed cost oil expenses would trigger an arbitration process, but future strengthening of that process is needed.

“So what happens if you have a dispute? You have to go to an arbitration process. We may have to just strengthen that process but you would always have to have a dispute resolution process, because if you have two parties that don’t agree based on audits, you have to do that,” Dr. Jagdeo explained.

“We’re going to review it in the new PSA to see if we can strengthen it but you may not be able to eliminate the international dispute resolution clauses. Dispute resolutions have to be strengthened, [but] it’s standard in almost every contract that you go to three arbitrators or a sole arbitrator. Almost any dispute, not just with oil companies, any international dispute you have with a big foreign company, you’ll have to have those dispute resolution clauses.”

Questions on provisions for disputed expenses come as work continues on the review of the IHS Markit Audit of the 1999 – 2017 Cost Oil Expenditure, and disputed costs identified in the audit. The audit evaluates the US$1.67 billion in operational expenses claimed by operators of the prolific Stabroek Block, ExxonMobil and its partners, Hess and CNOOC.

Another audit covering US$7.3 billion in expenses from 2018 to 2020 has also been completed and will go through a review process where costs can be contested by the government.

According to the current PSA that Guyana has with the Stabroek block operators, the company can recoup up to 75 per cent of the revenue as cost oil, which is incurred production costs. The remaining revenue is split 50/50 between the government and the contractor. Hence, the amount of revenue that goes to cost oil affects the amount of money that the country is able to gain from its patrimony.

However, with Guyana currently auctioning off a further 14 oil blocks offshore, the government has begun work on a new PSA that will see new arrangements between future oil and gas operators.