In recognition of the fact that Guyana’s legal framework for the oil sector needs to be updated with a great degree of urgency to ensure proper governance, Vice President, Dr. Bharrat Jagdeo recently disclosed to the media that the process for legislative overhaul has begun.
The official who has oversight responsibility for the oil sector said, “…What we discovered in negotiations (with ExxonMobil) is that our laws are archaic and the oil law does not support new development in the sector. It is more than 30 years old and we are starting the process to review laws and make it modernized. The sector needs a modern legal architecture…”
Jagdeo said that the government is still working on the draft legislation which would allow for the creation of the Petroleum Commission to be established as well as for the absorption of the Energy Department. He said, too, that the government has started drafting legislation to criminalize the failure to disclose every cent received from oil companies. He also noted that the government has every intention of strengthening the Natural Resource Fund Act.
The administration’s move to strengthen the legal framework for the oil and gas sector would also be in keeping with appeals from global actors such as the Inter-American Development Bank (IDB). In one of its most recent reports, the bank which is helping Guyana develop its capacity to govern the sector effectively, said that the legal framework remains underdeveloped for adequate oversight along the value chain to maximize value capture by the state and wealth creation. It said that challenges that persist, in the context of the broader resource base, include how operators acquire and manage licenses, defining fiscal regimes, environmental management, local content, the conduct of public officials active in the sector, information disclosure and accountability requirements, and developing a coherent revenue management framework.
Under the current legal framework , the Bank noted that the government entities with roles in the oil and gas sector are largely dependent upon appropriations by the National Assembly and not flows of revenues from outside the government (e.g., a share of royalties and other fees from petroleum exploitation). The financial institution said that of course, an active petroleum sector that would produce significant revenues for the Government/governmental entities is a new development for Guyana. It noted however that thought should be given to whether changes in the existing legal regime in this regard are warranted, in the context of Guyana’s decisions on the management of the revenues it will receive from licensed petroleum activities.