Com­pet­i­tive bid­ding is the best ap­proach for the award of oil ex­plo­ration leases

Stabroek News Sunday - - LETTERS -

Dear Ed­i­tor,

A re­cent ar­ti­cle in the Guyana Times ‘Min­is­ter’s rel­a­tives, friends now ap­ply­ing for oil li­cences, 201709-14’ makes ref­er­ence to Dr Jan Man­gal, Pe­tro­leum Ad­viser in the Min­istry of the Pres­i­dency. The ar­ti­cle raises con­cerns with a type of process used in the award of pe­tro­leum leases or blocks, that is the “one-on-one ne­go­ti­a­tion” or “open door” method.

In this method the Min­istry of Nat­u­ral Re­sources ne­go­ti­ates di­rectly with the in­ter­ested party. There is a very se­ri­ous risk of cor­rup­tion with this method due to the lack of trans­parency and ac­count­abil­ity. Most coun­tries have aban­doned this method as ex­perts rec­om­mend against us­ing it. Guyana should no longer be award­ing pe­tro­leum acreage via one-on-one ne­go­ti­a­tions after the Liza dis­cov­ery in 2015.

After the Liza dis­cov­ery in 2015, Guyana was in a po­si­tion to use the method of com­pet­i­tive bid­ding for the award of leases. The Liza dis­cov­ery de­risked Guyana, and as a con­se­quence, all the ma­jor oil com­pa­nies recog­nise that there is oil in the coun­try. Hence all the oil com­pa­nies will be in­ter­ested in bid­ding for leases in a trans­par­ent way, which en­sures that Guyana in­cor­po­rates mar­ket forces to max­imise its share.

The pe­tro­leum ad­viser’s po­si­tion has con­sis­tently main­tained that com­pet­i­tive bid­ding is in­deed the best ap­proach for Guyana. In di­rect cor­re­spon­dence from May 2017 with one such oil com­pany at­tempt­ing to ac­quire acreage via oneon-one ne­go­ti­a­tion, the pe­tro­leum ad­viser in­di­cated clearly to them that:

“Now that Guyana is on the radar post Liza, it is my per­sonal view that all fu­ture acreage should be leased in a way which max­i­mizes ben­e­fit to Guyana, hence in a mar­ket ori­en­tated way by an open bid round to en­sure com­pe­ti­tion. And acreage should not be ne­go­ti­ated one-on-one be­tween the Gov­ern­ment and a prospec­tive de­vel­oper.”

The risk of gov­ern­ment friends and fam­ily il­le­gally ob­tain­ing leases will be sig­nif­i­cantly re­duced if an in­de­pen­dently man­aged and well au­dited com­pet­i­tive bid­ding process is used. There is no rush to award more leases since Guyana is al­ready oc­cu­pied with the de­vel­op­ments in the Stabroek Block. Ac­cord­ing to the cul­ture in Chevron in th­ese cir­cum­stances, “there is al­ways time to do it right”.

While it is im­por­tant for the var­i­ous news houses to raise th­ese is­sues, it is dis­ap­point­ing to see that the jour­nal­ist did not fol­low the stan­dard prac­tice of pro­vid­ing an op­por­tu­nity for all sides to ex­press their views in the ar­ti­cle.

Yours faith­fully, Jan Man­gal Pe­tro­leum Ad­viser

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