Date: November 21, 2025
The Ministry of Natural Resources wishes to address the claims made in the Kaieteur News article titled “New PSA mirrors Stabroek Block blunder.” The report alleges that the government has created a loophole in a newly awarded petroleum agreement, potentially allowing TotalEnergies, Qatar Energy, and Petronas to recover royalties owed to Guyana if oil and gas are discovered and produced at Block S4.
We appreciate Kaieteur News for its continued interest; however, the conclusions drawn in the article are inaccurate and uninformed. In the petroleum industry, it is widely recognized that royalty payments on produced and sold petroleum are generally non-recoverable costs. The only exceptions occur in agreements where the recoverability of royalty payments is explicitly stated.
Understanding Cost Recoverability
Recoverable contract costs refer to expenses incurred while conducting petroleum operations, which can only be recovered from cost oil. This recoverable cost is deducted from the value of crude oil and/or natural gas produced in the contract area. As specified in Article 35.2 of the Agreement, “cost oil” is defined and establishes the basis for cost recovery.
Petroleum Operations are comprehensively detailed in the Petroleum Activities Act of 2023, encompassing various aspects of exploration, appraisal, development, and production operations, among others.
The Nature of Royalties
Royalties are fundamentally different from operational expenses; they are payments made based on production rather than profits. These payments occur before production is allocated between cost oil and profit oil, excluding them from recoverable costs. Therefore, unless explicitly included in the Petroleum Agreement, royalties cannot be treated as contractor costs.
Clarifying the Agreement
In Section 3.1 of Annex C of the Block S4 Petroleum Agreement, recoverable costs are listed that do not require additional approval from the Minister, often referred to as “costs recoverable as of right.” These include Exploration Costs, Development Costs, Operating Costs, and more. Notably, royalty payments are not encompassed within these categories and remain non-recoverable under standard terms of the Petroleum Agreement.
It is important to highlight that when Guyana began oil production in 2019, uncertainties regarding royalty payments led to an addendum in the Petroleum Agreement aimed at clarifying the issue. Experience gained since then has cemented the understanding that royalty payments are not recoverable unless explicitly stated otherwise in an agreement.
Conclusion
We appreciate that the only concern flagged by Kaieteur News was unfounded. Furthermore, we acknowledge their admission that all other discrepancies related to the 2016 Petroleum Agreement have been addressed in the current iteration.
As the oil and gas sector evolves, we encourage constructive and informed dialogue regarding its development. The Ministry will continue to provide timely and comprehensive updates pertaining to its management of the oil and gas sector, benefiting all Guyanese.
The End
