The company that submits the first acceptable application wins the opportunity to negotiate a petroleum agreement based on the company’s proposed terms.  The typical form of the agreement follows:

 

A legal preamble and recital clauses precede the Articles.

 

  1. Definitions
    • Some terms mentioned in the agreement are defined in order to avoid ambiguity regarding their meanings.
  2. Agreement, The Operator, Liabilities and Indemnities
    • These provision seek to identify the operator (where more than one company is involved in the application), to indicate that in such cases the parties are jointly and severally liable and to indemnify Government against claims by third parties.
  3. Petroleum Prospecting Licence and Guarantee
    • This article stipulates that the Petroleum Prospecting Licence is valid for four (4) years in the initial period with two succeeding optional renewal periods of three (3) years each.  In some cases, a preparation period of up to six (6) months can be granted to the initial period. 
    • This article also provides for the nature of the guarantees the contractor/licensee will be required to provide with reference to performance and satisfaction of obligations.
  4. Exploration Programme and Expenditure Obligation
    • The exploration programme and expenditure obligation for the duration of the agreement is detailed according to the initial period and renewal periods of the licence.  The article is entirely negotiable and would have its basis in the proposals submitted as application.
  5. Relinquishment of Areas
    • Agreed portions of the licence area are progressively relinquished in a manner consistent with the Act.
  6. Delegation; Cooperation between Contractor and Delegate
    • The minister of Petroleum may delegate any public officer or agency in accordance with the law to negotiate agreements and to implement the Minister’s undertaking.
  7. Annual Work Programme and Budget
    • These provisions are more expansive than at Article 4 and states the legal requirements for submission of annual work programme and budgets.
  8. Discovery and Developments
    • These provisions describe what steps are to be followed in the event of a discovery and possible development in the licence area.
  9. Records and Information; Confidentiality.
    • The Regulations specify what submissions of records are required.  This Article expands on the treatment of records gathered in the licence are including the confidentiality of same.
  10. Annual Licence Rental Charge
    • Rental Charges are negotiated.
  11. Cost Recovery and Production Sharing
    • Where production sharing is in the form of association chosen, the details of precisely how production from the licence area is allocated in this Article “Cost Oil” and “Profit Oil” are clearly detailed to avoid ambiguity.  The method of cost recovery and crude oil pricing is outlined.  These provisions are negotiated.
  12. Associated and Non-Associated Natural Gas
    • The provision describes what happens in the event of the discovery of associated and non-associated natural gas over the licence area.
  13. Valuation of Crude Oil
    • Details of the methodology of valuing any crude oil produced are described.
  14. Disposal of Production
    • These provisions are the subject of how crude oil is disposed of by the various parties.
  15. Taxation and Royalty
    • The Law requires royalty payments, which are negotiated.  The taxation provisions will be informed by the nature and type of Agreement.  Presently, the tax issue is being reviewed with the outcome to be given by the Tax authorities and the Ministry of Finance.
  16. Contracts and Assignments
    • Assignments of interests to another party must be approved by Government and all documents to support such assignments will have to be provided to Government.
  17. Domestic Supply Obligation
    • It is a requirement that any contractor meet this supply to the country, the needs of which are small.
  18. Guyana Resources
    • The Operator/Contractor gives preference to purchasing of Guyanese goods and materials and also necessitates the employment of Guyanese sub-contractors where feasible and where local services are comparable with international labour services. 
  19. Employment and Training
    • The provisions at (18) and (19) encourage and/or mandate the use of local resources and the employment and training of Guyanese on the job as a supplement to the discharge of academic training obligations, which is by contribution to a training fund.
  20. Right to Assets and Insurance
    • Particularly at the termination of the agreement, handing over of assets is detailed in the provisions.  The nature of required insurance coverage is outlined in the provision also.
  21. Import Duties
    • These provisions permits certain required equipment and other necessities to be imported without the payment of customs duty.  This provision defines concessions to expertise employed by the contractor for import of personnel and household effects.  These terms are subject to the limitations of the Customs and Excise Department.
  22. Foreign Exchange
    • The right to retain abroad foreign exchange earned from sales of petroleum is provided for in this article.  Foreign exchange is guaranteed by this article, and the preferential treatment for the earnings of subcontractor and expatriate employees are also guaranteed.
  23. Accounting and Audits
    • The contractor is required to maintain proper accounting records, which are described in the provision.  This article also refers to the Accounting Annex of the Agreement.
  24. Force Majeure
    • This is a common provision in petroleum agreements.
  25. Assignments
    • The law requires the Minister to approve any assignment of interest of the licence.
  26. Sole Expert, Conciliation and Arbitration
    • The procedures for resolving disputes are detailed by this provision.  UNCITRAL and ICSID are possible avenues through which arbitration settlements may be channeled.
  27. Applicable Law
    • The Laws of Guyana are the applicable laws.
  28. Protection of the Environment
    • The contractor has obligations to conduct operations in a manner consistent with internationally accepted practices.  In so doing, the contractor is required to submit to the Environmental Protection Act.
  29. Termination and Cancellation
    • These provisions follow the sections in the Act, which relate to the expiration the licence or breach of Section 42 of the Act.
  30. Effective Date
    • Usually the date of signature but may otherwise be described.
  31. Miscellaneous
    • A collection of provision that provides directions on certain issues of context within the agreement.
  32. Stability of Agreement
    • This provision protects the investment potential for the contractor against unforeseen major economic upheaval.
  33. Notice
    • Address and contracts are named thereon.
  34. Annexes to the Agreement
    • These include the accounting procedures and such matters that are to be read as part of the agreement.