By Vishani Ragobeer
Guyana is auctioning off some 14 oil blocks offshore for future development but the country’s Vice President Dr. Bharrat Jagdeo on Tuesday said each investor will be allowed up to three blocks.
Dr. Jagdeo, who spoke about Guyana’s energy policy at the International Energy Conference Guyana at the Marriott Hotel in Kingston, Georgetown, said the government has taken this decision to limit the blocks auctioned to investors in a bid to speed up development.
With each investor only able to secure three of the 14 available blocks each, the Vice President explained that multiple investors can develop the offshore oil resources simultaneously.
“We want multiple investors coming in here… they can start simultaneously,” he highlighted.
He also said, “The energy policy if we look at it, it’s oil and gas development and we are unapologetic from the government side saying that we want this sector developed as quickly as possible.”
Because of the expected changes in the global energy market, Guyana is keen on developing as much of its oil resources as possible. And beyond limiting investors, the Vice President explained this is why Guyana decided to pursue an auction and not form a national oil company.
Importantly, the government has also set aside some oil blocks for direct government-to-government engagements.
Jagdeo said Brazil, Qatar, India and Kuwait are among the countries which want to explore the direct allocation of oil blocks.
Previously, it was known that India, Qatar, the United Kingdom and the United Arab Emirates (UAE) were interested in Guyana’s oil blocks.
The bid round for 14 new oil blocks was launched last December and it is expected to close by April 2023. The Guyana Government hopes to award contracts by the end of May 2023.
The oil blocks on auction are for shallow and deep water areas.
There will be separate requirements for qualification to participate in deepwater versus shallow water blocks for tender with a higher bar set for deepwater areas. There will be a minimum signature bonus requirement of US$10 million for shallow water and US$20 million for deepwater blocks.
Guyana is also developing a new model Production Sharing Agreement (PSA)- or, simply, an oil contract ahead of the auction.
This contract is touted as a marked improvement from the PSA signed with the ExxonMobil-led consortium for the prolific Stabroek Block.
Jagdeo told the gathering that a 10 per cent royalty rate will head the new model agreement, up from the two per cent granted to ExxonMobil for its ongoing exploration and production in the Stabroek Block. Additionally, a corporate tax of 10 per cent will be instituted, where there was none before.
It is also known that the 75 per cent cost recovery ceiling has been lowered to 65 per cent. The sharing of profits after cost recovery will remain 50/50 between the government and the contractor.
Based on studies done by the IHS Market, an international information services provider, Jagdeo believes Guyana can ask for these improved terms while still remaining competitive and attractive to investors.
