Guyana’s ‘lawless’ donations force Brazil to bend over backwards to keep oil companies
[From left] Former President David Granger and current President, Dr. Irfaan Ali
Kaieteur News – Competition for investors in the petroleum industry has grown stiff amid the COVID-19 pandemic and the genesis of global energy transformation.
With this change, countries have had to ensure, as they work, that their regulation is strong enough to prevent oil companies from being stolen. They would also offer terms and a system that is fair and attractive. Guyana has so far avoided striking this vital balance between being an attractive investment destination and delivering value to its people.
The country was advised to negotiate the terms of a fair oil contract for the Guyanese public and to use the sector’s formative years to develop Guyana’s regulatory capacity right before oil production began.
Instead, the David Granger administration placed one of the world’s most valuable oil blocks – the Stabroek block – on extremely generous fiscal terms, and approved two oil developments without timely financial audits and securing the necessary protections for the environment.
As a result, other oil producing nations have come under pressure to loosen their security and strict competition requirements in the industry.
The CEO (CEO), Roberto Castello Branco, of a Brazilian state-owned oil company, Petrobras, Brazil, threatened late last year to set the company’s sights on Guyana, if the government took too long to issue environmental permits to drill at Fox News do. Amazonas Basin, according to S&P Global Platts.
The energy industry information provider said Branco said: “This must be resolved,” during a talk at the Rio Oil & Gas 2020 digital conference. “We have big oil prospects there, and we are banned while Guyana enjoys a and opening, ”he added.
S&P went on to report that as of December 31, 2020, Brazil is eyeing more industry reforms to attract investors, in the midst of a series of actions already taken. The company said Brazil needs to rise to remain one of the world’s top destinations for energy investments.
Platts said the Brazilian Congress is expected to discuss potential changes to the production sharing regime next session, which would allow the National Policy Energy Council, or CNPE, to decide whether oil blocks would be sold under the production or concession sharing models.
Platts reported that Brazil’s mines and energy minister Bento Albuquerque said the country could be biased toward selling oil blocks under the concession regime, rather than the PSA regime, given the current global scenario.
With the concession regime, the oil companies pay royalties and special participation taxes on the petroleum produced, rather than the PSA regime, where they deliver a certain percentage of the profit oil to the Brazilian government and include supervision by a government management company. The concessionary procedure is considered favorable.
According to Platts, Brazil has also had to reduce the requirements for oil companies to use locally procured goods and services, which caused delays.
The country is struggling with other issues that cause delays, such as stringent environmental and other regulations. Platts said Brazilian officials say the current scenario will need flexibility as Brazil faces fierce competition from other oil producers, including neighbors like Guyana and Uruguay.
Guyana has been issuing licenses quickly, but this does not necessarily mean that the baby oil producer has been expertly managing its oil sector.
Under the Granger administration, the Environmental Protection Agency (EPA) granted ExxonMobil a license on the same day it received the 1,500-page environmental impact assessment for the Liza Phase One project. The regulator was later prosecuted for granting ExxonMobil a 20-year license, when the law only allows five-year licenses to be issued. That lawsuit was successful. Clearly, the EPA has been quick to issue permits without conducting complete reviews, and with terms that do not necessarily comply with the law.
On the other hand, the Irfaan Ali administration, since taking office, has been criticized for its approach to conducting reviews.
The Government hired former Alberta Premier of Canada, Alison Redford, to head Payara’s project review team. Redford was forced to resign from politics after she mismanaged public funds while in office. The hiring of the former premier is further complicated by the fact that she benefited from thousands of Canadian dollars donated to her party by ExxonMobil’s Canadian subsidiary, called Imperial Oil. This raised questions about whether Redford had a conflict of interest in its review of Exxon’s US $ 9B Payara project.
The product of her review gave no end to two of the controversial environmental breaches committed by ExxonMobil in the Stabroek Block, dumping thousands of barrels of daily produced water, and blazing over 12 billion cubic feet of natural gas. The PPP / C government issued the licenses only six weeks after it began its review.
This is the kind of lax regulatory system and obvious generosity Brazil is now being forced to compete with.
Brazil, with its maturity in oil and years of securing hundreds of millions of US dollars in signing bonus payments, is continuously implementing and breaking a wave of industry reforms to maintain its leading status in the industry.