Guyana has a new petroleum law. But if you want to understand how the country’s petroleum sector actually works, this law is only one part of the picture.
That has become particularly clear as another question continues to hold sway within the national conversation: how should the costs of ExxonMobil’s future Stabroek Block projects be treated? This question may sound highly technical, but here is another that may be easier to understand: when billions of dollars are spent developing another oil project, which revenues can be used to recover those costs, and when does Guyana receive its share of profit?
Addressing these questions requires more than knowing that Guyana passed a new petroleum law in 2023.
The new petroleum law, the Petroleum Activities Act 2023, is a central part of the framework governing the sector, covering areas from exploration and production to licensing, safety, oversight and eventually decommissioning. But it exists alongside petroleum agreements, licences, regulations and other legislation that together determine what companies can do, what Government can require, how petroleum operations are managed and ultimately, how Guyana’s petroleum resources become a revenue stream for the nation.
First, where does the Petroleum Activities Act fit?
The Petroleum Activities Act became law in August 2023, replacing the Petroleum (Exploration and Production) Act 1986. Importantly, regulations made under the previous legislation continue to have effect under the new Act unless and until they are replaced or otherwise dealt with. That means the transition to the new petroleum law did not simply erase all of the rules that existed before it.
The Act provides the legislative framework for regulating and managing petroleum activities in Guyana. But it does not stand alone.
Guyana’s petroleum sector is also governed through petroleum agreements, licences, regulations and other applicable laws. The Petroleum Activities Act provides the wider statutory framework for petroleum activities, while petroleum agreements contain contractual provisions dealing with matters including cost recovery and the sharing of profit oil.
In other words, understanding Guyana’s oil sector means understanding not just what the law says, but which legal or contractual instrument governs a particular issue.
Before going further, there is another distinction worth understanding: upstream, midstream and downstream.
Upstream refers broadly to the activities involved in finding and producing petroleum. This includes exploration and production, as well as the initial processing of crude oil or natural gas to remove impurities so that it can be properly stored or transported. Exploration, development and production are therefore important parts of the upstream petroleum lifecycle.
Midstream generally involves the transportation and storage of petroleum.
Downstream takes us further along the chain, including refining petroleum into products that can eventually reach consumers.
For this series, our primary focus is upstream, because that is where much of the petroleum framework for exploration, development and production becomes relevant.
What does the Act actually cover?
The Petroleum Activities Act is extensive. Read our tutorial: Earth & Ink Tutorials: The Petroleum Activities Act 2023, Part I.
Part I, Preliminary, establishes definitions used throughout the legislation. These may appear technical, but definitions matter in law because they determine precisely what activities, persons and obligations particular provisions apply to.
Part II, Administration and Authority, deals with the administration and management of petroleum operations. It addresses the Minister’s role and authority, including the requirement to act in accordance with Cabinet directions on matters of policy and to ensure that petroleum agreements are consistent with the Act.
Part III, Exploration, addresses matters including geological surveys, petroleum exploration, the discovery of petroleum and the process for surrendering an exploration area.
Part IV, Development and Production, sets out important rules governing the transition from discovery towards commercial production. This includes the process for applying for a production licence, requirements and restrictions surrounding the grant of a licence, what a licence must contain, the periods applicable to licences for crude oil and natural gas, and the requirements surrounding renewal and surrender.
Part IX, Decommissioning, addresses what must eventually happen when petroleum operations and infrastructure reach the end of their useful life. It establishes obligations for licence holders concerning the closure of petroleum operations. We will unpack these requirements separately in the next article in this series.
Part XIII, Safety, Security and Emergency Response, establishes obligations relating to petroleum facilities and infrastructure, risk assessments, safety management systems, security and emergency preparedness and response.
Part XVI, Monitoring, Supervision, Inspection and Verification, provides the framework for Government oversight of petroleum activities. It allows the Minister, or an authorised person or government agency, to carry out monitoring, inspections and other oversight necessary to enforce the Act. These powers are significant. They can include entering areas, structures, buildings, vehicles, vessels or aircraft being used, or intended to be used, in connection with petroleum operations. Authorised officials can inspect and test machinery and equipment, take samples or evidence where permitted under the Act, and issue certain directions or restrictions concerning the health and safety of workers.
Together, these provisions begin to answer some fundamental questions. Who can explore for petroleum? What happens when oil is discovered? What approvals are required before production begins? What conditions can be attached to a production licence? What powers does the Government have to inspect petroleum operations? And what obligations remain when an oil project eventually comes to an end?
These questions concern the management of a national resource.
Why this matters now?
Guyana’s petroleum industry is moving quickly, and the questions surrounding it are changing too.
The ongoing examination of costs and cost recovery is a useful example. Cost recovery affects how petroleum revenues are divided and, ultimately, the timing and amount of revenue available to Guyana.
It also demonstrates why understanding the Petroleum Activities Act alone is not enough.
When we hear about cost recovery, production licences, petroleum agreements, decommissioning obligations, safety requirements or Government approvals, each sits somewhere within a much larger legal and contractual system. Knowing the basic architecture of that system makes it easier to understand what is changing, who has the authority to make particular decisions and what those decisions could mean for Guyana.
What will this Conversation on the petroleum framework unpack?
The Petroleum Activities Act gives us an important place to start, but it is not the entire story. As this series develops, we will look at the legislation alongside the agreements, licences and regulatory processes that shape how petroleum moves from a discovery beneath Guyana’s waters to a producing development worth billions of dollars.
Disclaimer: This series is intended for general information and public education. It is not a substitute for the Petroleum Activities Act 17 of 2023 or for legal or other professional advice.
