50%-60% profit, 1% royalty in oil contract with Tullow, Eco Atlantic

The Guyana Government stands to receive as much as 60% of oil profit in the Production Sharing Agreement it signed with Tullow Guyana B.V and Eco (Atlantic) Oil and Gas Inc., two major oil companies that are currently exploring in the Orinduik Block offshore Guyana.

After the companies recover their costs for that month, the oil profits are split in a tiered manner which could see the Government getting as low as 50% or as high as 60%, according to the PSA which was released by the Ministry of Natural Resources on Saturday.

The Government will get 50% for the first 25,000 barrels of oil, 52.5% for the next 25,000 barrels of oil, 55% for the next 15,000 barrels of oil, 57.5% for the next 15,000 barrels of oil and 60% for anything more than 80,000 barrels.

However, the contract states that the oil companies reserve the right to use as much of the oil it requires for any of its operations and that the oil used will not form part of the calculations for the profit.

“The Contractor shall have the right to use in any Petroleum Operations as much of the production as may reasonably be required by it therefor and the quantities so used or lost shall be excluded from any calculations of Cost Oil and/or Cost Gas and Profit Oil and/or Profit Gas Entitlement,” the contract states under Article 11 – Cost Recovery and Production Sharing.

The PSA states that the rate of royalty will be 1% which is lower than the rate of royalty in the ExxonMobil contract.

Tullow Oil, parent company of Tullow Guyana B.V. is a leading independent oil and gas exploration and production company, which has interests in 90 exploration and production licences across 16 countries that are in West Africa, East Africa and “New Ventures” which includes Guyana and French Guiana.

Eco (Atlantic) Oil and Gas, Inc. was incorporated in January 2011 as Eco Oil and Gas Limited as a small independent international oil and gas exploration company based in Toronto, Canada. It has a 40% interest in the Orinduik Block while Tullow Oil has 60%.

3D seismic operations in the area were completed in early September 2017 and processing and subsequent interpretation follows with the possibility of drilling in 2019.

Both companies have said they are very optimistic about the prospects for recoverable petroleum in the Orinduik Block.

See the full contract here: https://www.nre.gov.gy/wp-content/uploads/2018/03/ECO_ATLANTIC_GUYANA_INC.pdf