Guyana’s deepwater investment climate is expected to remain regionally competitive over the next five years, even though the government has expressed plans to adjust the fiscal regime and establish a national oil company (NOC).
This was recently noted by Ford Tanner, an Energy Analyst at IHS Markit. The UK-based firm examines data and information that caters to a variety of industries including automotive, energy, financial services, defence, and maritime.
Expounding further, Tanner reminded that the International Monetary Fund (IMF), which is providing guidance to Guyana on the management of eventual hydrocarbon revenues, had suggested in April 2018 that Guyana’s petroleum fiscal regime is too generous to foreign investors.
The IMF advocated that going forward, Guyana’s model contract should feature higher royalties, a profit share based on a sliding scale (as opposed to the current fixed profit share), and tighter restrictions regarding cost recovery. The IMF also suggested that Guyana should consider temporarily halting new licensing until a revised fiscal regime is enacted.
Tanner said that his firm expects that any changes such as those mentioned will not materially hinder the country’s ability to stay regionally competitive with other countries in Latin America.
The analyst said, “The fact that contracts extended in 2016 feature a fiscal stabilisation (or rebalancing) clause underscores the commitment on the part of local authorities to honouring the fiscal terms of signed contracts.”
The analyst added, “We anticipate that upstream investors will be able to access unlicensed areas through multiple pathways entailing operated and non-operated equity positions. However, Guyana will likely seek to enact a series of changes to upstream policy before licensing new areas through bid rounds or direct negotiations.”
Tanner said that achieving all these objectives will require at least 12 months based on the experiences of other countries in the region.