Guyana is still weighing its options when it comes to the setting up of a National Oil Company (NOC). Vice President Bharrat Jagdeo said on Monday that the government has been following the debate in the public domain on the pros and cons of a NOC.
He said the negatives of the establishment of an NOC are as many as they are undeniable. However, the main positive of having a NOC—garnering more revenue—may be enough to tilt the scale. In colloquial terms, it is really all about the paper.
Jagdeo said, however, that to avoid what the government sees as the main negatives, the establishment of a traditional NOC is not an option.
He said that an “old style” NOC, which is typically operated by the government, may present major difficulties for the country.
Jagdeo noted that given the United Nation’s goal for the world to achieve the net-zero target by 2050, it becomes harder to raise money globally for a NOC. Another deterring factor for the setting up of a traditional NOC is that this may slow down production.
Jagdeo told the media, “If we were to vest all the remaining assets in a national oil company it can lead to too much concentration and slow down the process of exploration.”
He explained, “Having just one strategic partner to work with can lead to a much slower process of exploring and proving our resources in an era when we want to accelerate the proving and possibly get them (into production) before the world totally decarbonizes.”
“…It is more like a passive ownership of shares in companies in exchange for offshore blocks that we have,” said Jagdeo.
The Vice-President said that in this scenario, Guyana secures shares which will translate to revenue but does not maintain any responsibility for offshore operations or day to day management of the company.
Jagdeo said that the main benefit of this sort of passive ownership comes back to more revenue as Guyana will gain both the revenue from the modified Production Sharing Agreement (PSA) as well as the revenue from shares in the company.
While Jagdeo did not specifically state this as a benefit, a non- traditional NOC may also quell concerns of corruption. Such a company may also avoid being plagued by the perceived weakness of most state/ government institutions.
Also, the startup time would be circumvented. However, the main downside is that in the event oil is not found in commercial quantities, Guyana can lose money.
Jagdeo committed to keeping the media up to date on the government’s thought process as regards its decision on having a NOC.
