Guyana’s laws do not allow oil regulator to act independently

The Inter-American Development Bank (IDB) has once again pointed to glaring loopholes in Guyana’s legislative framework which essentially weakens the veil of protection that is needed for the oil sector.

According to the bank, the Petroleum Exploration and Production Act and the Petroleum Commission Bill, in their current state, do not contain any clauses that guarantee the independence of any regulator that is appointed for the sector nor does it ensure adherence to industry norms.

The financial institution said that a new Petroleum Commission Bill is needed to address these gaps that avoid or reduce control over technical and procedural aspects of the regulator. Expounding further, the IDB noted that the current Petroleum Commission Bill leaves the Commission at the behest of the Minister of Natural Resources or in strictly an advisory or supporting role to the Minister of Natural Resources and the Cabinet.

The Bank pointed out that this situation impacts the approval, amendment, and rejection of information submitted by international oil companies for petroleum prospecting and production licences; preparation and management of bid rounds for licence grants; and approval, amendment and rejection of petroleum operators’ budgets, work programmes, field development plans, production forecasts and decommissioning plans.

In addition, the Bank said that the current Petroleum Commission Bill does not assign to the Petroleum Commission, functions such as receiving and fully processing applications for petroleum prospecting and production licences and proposals for Petroleum Agreements, and negotiating Petroleum Agreements, or preparing model contracts for the petroleum sector.

The financial institution said it is important to attain the required level of independence and fiscal autonomy for the Petroleum Commission that can be achieved through a new bill. It also noted that a review of the old petroleum law is necessary to protecting the industry as well.

Since the emergence of the oil and gas sector, the IDB has been one of Guyana’s key development partners, especially as it relates to strengthening its capacity to govern effectively. Towards this end, the IDB has approved a Policy-Based Loan (PBL) labelled Strengthening the Energy Sector (4698/BL-GY) for US$11.64 million in 2018; and technical assistance programmes, including four under execution: Guyana’s Emerging Oil and Gas Sector: Getting Institutions Right (ATN/OC16532-GY) for US$580,000 in 2017; Strengthening the Capacity of the Department of Energy (ATN/OC-17100-GY) for US$1 million in 2018; Strategic Communications and Knowledge Sharing Support for Guyana’s Oil & Gas Sector (ATN/OC-17165-GY) for US$582,682 in 2018; and Strengthening the Technical Functions of the Department of Energy (ATN/OC 17844GY) for US$606,062 in 2019.

The bank’s support follows the immediate need of building an entirely new oil and gas regime which requires the strengthening of the nation’s governance framework in order to streamline planning interventions, regulatory reforms, and the general needs of an evolving sector. The design of this operation considered lessons learned from IDBfinanced operations, including the importance of close collaboration and coordination with other agencies geared towards building the capacity of the government to manage the sector.

The bank is also implementing an investment operation that has synergies with this Programmatic Policy-Based Loan (PBP). This newspaper understands that the Energy Matrix Diversification and Institutional Strengthening of the Department of Energy (4676/BL-GY; 4676/BLGY-1 and 4676/BL-GY-2), for US$21.16 million in 2018, will diversify the energy sector with renewable energy and strengthen the nascent oil and gas institutional capacity.

This newspaper also understands that this support has been designed to address the needs of a country that has never been an oil producer. However, there is still significant work to be done in national sector planning at the governmental level, but the IDB has helped the government build a foundation to manage this emerging industry.

(Kaieteur News)