The Guyana Government will soon be announcing the new company that will market the country’s share of the light sweet crude oil from the Stabroek Block.
Back in September, Government had invited companies to market Guyana’s share of profit oil from offshore where United States oil major ExxonMobil is producing oil from two Floating, Production, Storage and Offloading (FPSO) vessels, and is gearing up to start production at its third project in the Stabroek Block before year end.
During his weekly press conference on Thursday, Vice President Bharrat Jagdeo disclosed that 25 bids were received during the tender process.
“Soon, you will be seeing the award for the marketing of our crude and for all three FPSOs. We received 25 bids and now they’re having discussions with the top three bidders,” Jagdeo indicated.
When pressed, he opted not to divulge any further information about the top three bidders, noting that it would be released as soon as the Natural Resources Ministry concludes the ongoing negotiations.
According to the Vice President, the key variable is credibility and price. With the latter, he explained that Government was particularly happy with this bid, since it was able to move from paying a marketing commission, which was introduced during the previous A Partnership for National Unity/Alliance For Change (APNU/AFC) administration, to removing that commission in last marketing contract last year and now getting a premium instead from the new marketer at a price above the international market value.
“They will pay us a premium above the daily Brent average for the five days… So, we’re pleased now we’ve seen a shift now, moving from having to pay a marketing commission to sell our oil to now zero marketing commission and now we’re getting a price for barrel above what the benchmark that we were using is,” he explained.
Nevertheless, Jagdeo added that one of the bidders submitted a proposal for a single FPSO but with a high premium, while another is offering Government an option to pay a portion of the premium along with training, but the option to pay the full premium is still on the table.
“The Ministry is working through this. You’ll get the names of all of the people and an explanation as to how [the marketing will be] done,” the VP related.
Invitation for bids
The invitation for bids issued by the Natural Resources Ministry in September, closed off on October 17, 2023. It had invited eligible bidders to submit their bids for the provision of marketing services for Guyana’s entitlement of oil from offshore production activities. They will have to competitively market and maximise the value of the Government’s crude oil entitlement from developments in the Stabroek Block, and create a competitive market for the Liza, Unity Gold, and Payara Gold blends.
These bids were on a lot basis; hence bidders could have bid for one or more lots.
Last October, United Kingdom’s BP Oil International Limited won the one-year contract to market Guyana’s share of profit oil from the Liza Destiny and Liza Unity FPSOs. In that contract, the People’s Progressive Party/Civic Government had cut out the marketing commission for this service.
A marketing commission is a percentage of the revenues generated from the sale of crude, which would go to the third party acting as Guyana’s agent.
Nevertheless, the new contractor that would be selected will now have to market the country’s crude from three FPSOs.
Prior to BP Oil, Saudi Aramco was contracted in September 2021 to market Guyana’s share of profit oil from the ExxonMobil-led operations offshore.
Guyana started producing oil in December 2019, and its crude lift was initially marketed by Shell Western, after which Hess International marketed the following oil share.
Currently, Exxon and its co-venturers Hess and CNOOC are producing as much as 400,000 barrels per day (bpd) with the two FPSOs in the Liza field. The Payara development will add another 220,000 bpd when production is regulated in a few months after start-up.
For 2023, Guyana is entitled to 17 lifts.
In September, the Guyana Government released the Mid-Year Report of 2023, in which it was reported that there were eight lifts of profit oil from the two producing FPSOs during the first half of this year.
Between January and June 2023, Government earned US$705.2 million as revenue from its share of profit oil from two lifts that occurred in the final quarter of 2022, and seven of the eight lifts that occurred in the first six months of this year. Government also earned US$110.8 million in royalties from 2022’s last quarter and from production and sales in the first three months of this year.
According to the report, in July, US$73.8 million was received as a profit oil payment for the Government lift done in June. The cumulative balance, inclusive of interest income of US$35.6 million, at the end of June was US$1723.5 million, after withdrawals of US$200 million each in the months of February and May.
It was noted, however, with the price of crude oil declining amid demand-side concerns and financial market disruptions that threaten a global slowdown in economic activity, the forecast for NRF deposits has been marginally downgraded. Petroleum deposits for the year are now projected to total US$1629.3 million, compared with US$1631.7 million estimated at the beginning of the year.
Consequently, the Guyana Government is now projected to earn some US$1410 million from the sale of Guyana’s share of profit oil, and US$219.3 million in royalties. It is anticipated that at the end of the year, the Natural Resource Fund (NRF) closing balance will stand at approximately US$2 billion.
So far this year, Government has withdrawn, in four tranches, some $124.8 billion (US$600 million) from the NRF, which is being held in an account at the New York Federal Reserve Bank in the United States. In the second half of the year, it is anticipated that another $125.2 billion will be withdrawn from the NRF.
