Guyana’s offshore opportunities will remain attractive for oil companies despite the lack of a regulatory agency to oversee the oil and gas industry, says Fitch Solutions, a New York-based company.
Founded in 2008, Fitch Solutions is an industry-leading provider of credit, debt market, and macro intelligence solutions.
According to the company, the increasing interest among oil producers, underpinned by the discovery surpassing expectations in the Orinduik block, proves the potential of Guyana’s offshore fields. And while the attractiveness of those fields will remain in the absence of a regulator, Fitch Solutions cautioned that the downside of this is that Guyana leaves the sector open to the risk of being underdeveloped and inefficient.
Fitch Solutions further noted that the most recent amendment to the Petroleum Act was made in 1992, and the only entity overseeing Guyana’s oil and gas industry is the Department of Energy. On the back of a poor regulatory system, it said that the industry is prone to the abuse of power.
It also said that in spite of potentially higher royalties and local content laws that will increase government take from produced reserves, the next bidding round will remain attractive to oil companies based on the previously successful exploration efforts.
Fitch Solutions said, “The Guyanese Department of Energy is currently drafting the local content policy law which will come into force before first oil is produced in 2020. While ExxonMobil has already invested in local businesses, there is a risk that the local content requirements can increase oil production costs or simply be unrealistic given the lack of industrial development.”
That said, the firm noted that the local content policy is common among developing economies eager to develop local technical capabilities and boost employment.
