Contract 2-85, which was signed in 1985 between the government of Guatemala and the company Basic Resources (today Perenco Guatemala) in the Laguna del Tigre National Park for a period of twenty-five years, concluded at the end of August 2010, but was extended 15 More years.
Therefore, this contract will expire in August 2025 but it can no longer be extended, in accordance with current legislation, which is why the last government, chaired by Alejandro Giammattei, sought to modify the Hydrocarbons Law, decree 109-83, to create a figure that would allow this and other companies to continue operating, with approval of the Executive Body.
The reform proposes the creation of the figure called Economic Limit, with which an oil field can continue operating, with authorization, as long as the income is greater than the costs. It would also allow the President of the Republic, in the Council of Ministers, to approve continuous extensions for up to 25 years each or until the economic limit of the deposit is reached, which is the new figure proposed. In Congress, initiative 6021 already completed the second reading in December 2022, but the third and final approval is still missing.
Meanwhile, Perenco presented the environmental restoration process in August 2022 and began the process of abandoning wells in March 2023, of which three had already begun this process last May.
The Ministry of Energy and Mines (MEM) indicated in 2022 that upon concluding this contract “income from oil activity is reduced by more than 80%, an aspect that reduces the budget of all municipalities in the country.”
The answer is no
At the meeting of Block Heads yesterday, Minister Ventura’s response was that the government’s current position is that “it is going to act in accordance with the current legal framework, so it is not possible and there are no plans to extend or renew contract 2-85”.
The official said that the decision was made for several reasons: oil extraction cannot be operated in reserve areas, apart from the fact that there is no environmental impact study. Now, “the measure will be to convene tables with society to determine what to do with the assets that are reverted and with the resources; how to use the infrastructure and how to modernize oil exploration.”
He added that it is important to modernize the hydrocarbon regulatory framework and think regarding a totally sustainable oil industry in the coming years.
In addition, representative authorities of Petén and the country will be convened for these technical tables to discuss the development model, but not in protected areas, the official warned. He added that there are studies that there are less polluting resources, so that issue will be looked into, and agents, including Perenco and new agents, will be invited to participate. In his opinion, if you look only at the short term, you only see a problem, but thinking regarding the medium and long term, the development will give better benefits and he believes that the new development model might be presented in the last quarter of 2024.
The discussion begins
Given this, deputy Álvaro Arzú Escobar indicated that everything is already depredated and that the area was declared a reserve, following the oil contract already existed, so with the end of the contract “90 percent of the industry would be wasted.” oil company and it is the same as killing it.”
To which Ventura responded that “those were other times and now there is a law that declares it a reserve area.”
Congressman César Fion added that the State and the population are going to own 100% of the exploitation, “but the question is whether the government has the capacity to operate the area,” he added that Perenco has 32 active wells out of 52 in total. and a production of 6 thousand barrels per day. And of the area, “the 500 hectares in charge of that company are the only ones that are protected.”
“We have only been in office for two months and it is a difficult decision but oil activity is not closed in all of Petén, but in a protected area. At first it will be difficult, but a new sustainable hydrocarbon process model will be sought and work will be done to have these development alternatives,” Ventura explained.
Legislator Nery Rodas entered the discussion pointing out that Petén’s economy will be affected and criticized that the government entered “with great expectations on the part of the population, but is making decisions without making the respective consultations; for example, to mayors and development councils.”
You divergent
For his part, deputy Fidel Reyes said he was in favor of granting the use of non-renewable resources, but under other conditions: “exploitation, as it has been carried out, has brought poverty to the populations, as happened with a mine. in San Marcos. The figure of a Colombian oil company should be used, which is a real public-private alliance, with 51% for the State and 49% for those who want to invest but with a maximum amount.”
Congressman Jairo Flores assured that “Perenco is stealing from the country”, since it is receiving billions of dollars from extraction, while royalties for the State have only amounted to US$713 million, while due to recoverable costs, the government has paid US$900 million. In other words, the balance is negative for Guatemala at US$186 million, so it is a leonine agreement.”
Regarding what Flores pointed out, deputy Jorge Ayala says that it is false that the State pays companies for exploiting oil, and several deputies asked the MEM to send a report regarding these items, to which said ministry got engaged. Meanwhile, Vice Minister Luis Ayala explained in the meeting that the legislation establishes that the investment for the operation will be recognized in the oil income, which is the number of barrels produced, for which the company pays the royalties and deducts from the oil operation. . The state does not give money, but it is deducted from the royalties, he added.
And legislator José Chic stated that it is necessary to discuss the issue of the entire oil industry and another initiative can be worked on, “but not with environmental and fiscal impunity like the initiative that is already in Congress. It is not being once morest the oil industry, but rather the model. If they want to rescue the oil industry, let’s discuss it, but responsibly and taking into account Petén, Alta Verapaz and other departments.
Finally, Ventura clarified that Perenco does not have just one award since it has the will continue to operate.
Asked how long a closure activity takes, the minister explained that it is not quick, and that there has been talk of a scheduled closure of the Xan well operation, which he says cannot be done in two years, but rather It would be in four years. “Yes, it is necessary to close a scheduled closure and find a way to do it,” he added.
This week the version of Perenco executives was sought, but they indicated that they would wait to know what the minister would say at that meeting to provide statements.
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