Since you may be interested in investing in the local petroleum upstream industry, the following are some guidelines that your company may study when applying for a petroleum prospecting and production licence in Guyana.
The prospecting licence usually last for ten (10) years. It consists of an initial period of four (4) years with provisions for two (2) further periods, which is at the option of the licencee. Each period shall not exceed three (3) years. Each period shall not exceed three (3) years. Based on the provisions of the Act, the licencee is allowed up to six (6) months for pre-exploration contingences when deemed necessary. Relinquishment is mandatory and the licencee is required to do such for portions or a percentage of the licenced area at given intervals during the terms of the licence. These mandatory relinquishments exclude the discovery areas.
In terms of the Petroleum Production licence, this licence is issued if a commercial petroleum discovery is made. This licence has an initial period of twenty (20) years, with a single renewal period of up to ten (10) years, which can be applied for, if necessary.
Legislatively, the laws that govern and regulate exploration and exploitation of petroleum in Guyana are provided by the following Act and Regulations.
- Petroleum (Exploration and Production) Act No.3 of 1986 and its accompanying Petroleum Regulations.
Concerning the petroleum prospecting licence, the terms and conditions from which a licence is granted are usually established through negotiations. The Act envisages that an agreement not inconsistent with this Act, will document any such settled terms and conditions to be included in licences granted under the Act. The Minister Responsible for Petroleum is authorized by the Act to conclude such agreements.
Production sharing agreement between Government of Guyana and oil companies for licences granted to and held by oil companies
Foreign companies must register companies in Guyana. This, however, is not a requirement for foreign companies to incorporate locally in Guyana in order to be eligible for granting of licences.
This is the base minimum outline that the Government of Guyana gave on certain terms and conditions:
- Production Sharing – Contractor shall be allowed to share the profit oil with Government so that Government shall have no less than fifty percent (50%) on a “per field” basis.
- Cost Recovery – Contractor can enjoy a maximum or a ceiling of seventy-five percent (75%) of recoverable costs per month.
- Taxation – The tax obligations of the contractor under the Income Tax, Corporation Tax, and Property Tax shall be satisfied through the Government’s share of profit oil.
- Withholding Tax – New tax guidelines are being worked on this time for affiliated companies and/or contractors
- Import Duty – The Guyana Government shall permit contractors and subcontractors to import certain items free of duty and other taxes inclusive of machinery, equipment, vehicles, materials, supplies, consumerables (other than foodstuff and alcohol) and movable property utilised solely for petroleum operations.
- Fuel – This consumable shall attract a reduced Excise Tax of up to ten percent (10%) in keeping with the solid minerals sector.
Procedures for Petroleum Prospecting Licence
- Application are made to the Minister Responsible for Petroleum in a Form set out in the Regulations (Form A)
- The application form must be accomplished by a Proposal on the Economic Terms governing the applicant’s exploration and production activities.
- The prospecting area to be covered by the prospecting licence applied for, the minimum work programme and expenditure obligations in respect of the licence area shall be negotiable, and the applicant will be required to submit a technical proposal in respect thereof.
Please note that suitable applications, that is, those with acceptable bonafides and proposals acceptable to the Government are the basis upon which negotiations can commence. Each application is looked at, to the exclusion of succeeding applications. The first company from which an application is received and which is acceptable by the Minister, is then invited to negotiate a petroleum agreement. No other application is accepted to the time negotiations commenced and is completed. These negotiations are expected to progress in a timely manner to its final conclusion. The Minister of Petroleum then issues the licence and signs the petroleum agreement or may designate another government functionary to do so on his behalf.
Procedures for Petroleum Production Licence
Guyana has no commercial discovery for which such a licence apply but applications is in this regard will be guided by the Regulations which provide a Form of Application. “Companies are required to register under the Companies Act Chap. 89 of the Laws of Guyana in order for a valid licence to be awarded.
The Government of Guyana shall expect petroleum operations to be conducted with the same diligence, as is the norm in the U.S.A. and other environmentally progressive companies. Guyana’s Environmental Protection Act reflects levels of concern for conduct and performance in the industry that are not peculiar to hemisphere producing countries that have sound environment policies and form attitudes for their implementation. Usually, before any major exploration activities occur, the company has to submit an Environmental Impact Assessment (EIA) or Statement (EIS), an Environmental Social and Management Plan (ESMP) or a Strategic Environmental Assessment (SEA) report. If the activity is drilling, then a Corporate Response Plan and an Oil Spill Response Plan has to be submitted. The Guyana Environmental Protection Agency (EPA) will give the company an Environmental Permit once it has complied with all the requirements.