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Guyana to adopt new model for awarding oil contracts

Irfaan Ali, the president of Guyana, has announced plans to introduce a new model for assigning oil blocks to investors. He explained that his administration was moving away from direct negotiations with international oil companies (IOCs) and would instead conduct licensing rounds. The bidding contests will be much less opaque, with contracts awarded to the party that submits the most attractive offer, he said.

“We have made it very clear that the process in awarding new oil blocks will be very much different,” he commented. “It will be an open, public process, and when we get to that stage it will be a public, open bidding process. We will be looking for the best offer in an open public bid.”

Ali did not say exactly when Georgetown might hold its first licensing round, but he indicated that the new model would come into force soon.

In the meantime, he stated, government officials have begun preliminary discussions on the question of whether any licence areas would remain in state hands. “Discussions are still ongoing,” he said. “It calls for a lot of technical analysis on whether Guyana itself will retain some of those blocks for our own development and to manage by ourselves, but that is very preliminary.”

Members of Ali’s administration have been critical of former President David Granger’s practice of negotiating with individual oil companies or consortia. They have asserted that this model results in the signing of contracts that are far more favourable to outside investors than to host countries with respect to the division of crude oil and natural gas revenues.

Ali and his allies are not the only ones taking this stance. Guyanese economist Bobby Gossai, Jr. noted last year that international financial institutions (IFIs) such as the World Bank and the International Monetary Fund (IMF), along with multi-lateral groups such as the Extractive Industries Transparency Initiative (EITI), were also proponents of transparency and the sale of assets through competitive public bidding.