Gov’t eyes auctioning oil blocks next year; to ensure companies eventually give up control of blocks

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By Vishani Ragobeer

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Guyana will be seeking to sell its oil blocks, including those that it is expected to get back from oil companies operating offshore, to the highest bidder from next year, according to Vice President Dr. Bharrat Jagdeo.

This new system of allocating oil blocks to companies seeking to explore and produce oil from areas offshore Guyana will replace the existing system of one-on-one negotiations with oil companies. And, Dr. Jagdeo said it should commence in the latter half of 2022, at the latest.

Guyana’s intention to move away from the direct negotiation and sale of oil blocks was first announced by President Dr. Irfaan Ali, earlier this year. Through the new system of auctioning, the company that says it will pay the most money will get to operate in the area.

Later, he said that technical expertise was needed to help the country auction the oil blocks because there are considerations as to whether the country should first do seismic studies or auction the areas without those studies.

Vice President Dr Bharrat Jagdeo

A seismic survey would allow the country and potential bidders (the companies) to have a clearer understanding of what oil resources exist in the area of potential oil production. It is costly to engage in this survey and Dr. Jagdeo said that the government would also have to consider who would pay for a survey to be done.

Importantly, too, the VicePresident noted that with the government intending to sell oil blocks to the highest bidder, the relinquishment provisions in Guyana’s oil agreements will have to be “aggressively” enforced.

For context, relinquishment essentially requires oil companies to give up control of a part of the oil block(s) they are operating in when the renewal period for the company’s agreement with the government has expired.

And, the Vice- President explained, “… added to the existing pool of areas available, we will now have the relinquished areas which can then form part of the auction that will take place.”

Yet another consideration, Dr. Jagdeo said, is whether the government will allow companies already exploring existing oil blocks from buying newer blocks.

Because there are these considerations, Dr. Jagdeo said that the government has given itself about a year to consider the various policy positions it would adopt.

He also noted that much emphasis has been placed on the local content policy and the revision of the Natural Resource Fund (NRF) in the short term, to strengthen Guyana’s oil and gas management architecture.

With these expected to be completed before year-end, it is expected that the government will be able to focus more on auctioning and the relinquishment clauses afterwards.

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