Fitch Solutions — an industry-leading provider of credit, debt market, and macro intelligence — is convinced that any move by the APNU+AFC Coalition Government to up the current royalty rate contained within Production Sharing Agreements (PSAs) would not scare away oil producers.
In one of its latest assessments, Fitch Solutions opined that even a doubling of the current rate will not discourage oil producers, especially after the recent oil discovery in the Orinduik Block, which further lowered the risks of exploratory projects outside of the Stabroek block that is operated by ExxonMobil and its two other international partners.
Fitch Solutions reminded that Guyana has been considering new policies regulating the oil and gas market. It also reminded that in July, last, the government announced its intention to raise the royalties in its production sharing agreements from the current level of 2%.
Fitch Solutions stressed that the current rate is low compared to other countries in the region like Brazil and Mexico, where the minimum base royalty rate for deepwater acreage is 10% and 7.5%, respectively. The New York-based company said that the Guyanese government informed that the new royalty agreement regime should be implemented ahead of the next bidding round, scheduled for the third quarter of 2020.
