Although Guyana produces no oil yet, the government already seems inclined to increase its claim on oil revenue.
A June 18 ruling by the Caribbean Court of Justice necessitates snap elections likely to return to power the opposition People’s Progressive Party (PPP).
“We expect a new administration to look to increase the state’s revenue take from the offshore oil sector,” writes Christian Wagner, Verisk Maplecroft Americas politics analyst in a research note.
Wagner says the PPP has said it won’t retroactively change the production-sharing contract of ExxonMobil, which will bring production onstream next year from its offshore Liza discovery on the Stabroek Block.
But other companies with interests off Guyana “are at risk of demands for renegotiation,” he says.
ExxonMobil expects the Stabroek Block, on which it has made 13 discoveries, to produce 750,000 b/d of oil by 2025.
The Caribbean Court validated a December 2018 vote of no confidence in the coalition government led by President David Granger.
The vote in the 65-member National Assembly was 33-32. Granger’s government argued unsuccessfully that approval of the motion required 34 votes and that the swing vote was invalid because a legislator with dual citizenship cast it.
The court also rejected Granger’s appointment of James Patterson as chair of the Elections Commission, saying the president unconstitutionally ignored recommendations by PPP Leader Bharat Jagdeo.
Whether Patterson can remain in office for the snap election is unclear. The uncertainty might delay voting, which the PPP wants to occur within 90 days. Granger’s government wants the ballot to await completion of house-to-house voter registration likely to last until at least late October.
Whatever the election’s timing, Verisk Maplecroft’s most recent probability forecast gives the PPP an 81% chance of winning. Part of the reason is “widespread public criticism” of the Granger administration’s management of Guyana’s nascent oil and gas industry.
“Even if existing contracts stand,” Wagner writes,” the next government almost certainly will look for a higher take in all future agreements.”
(From the subscription area of www.ogj.com, posted June 28, 2019. To comment, join the Commentary channel at www.ogj.com/oilandgascommunity.)
