…says all decisions on future blocks to be made in 3rd quarter
Proposals have been received from various oil operators in Guyana’s waters for them to aid in Guyana setting up a national oil company. However, the Government is still mulling whether it will go this route.
During his address to the International Energy Conference and Expo on Tuesday, Vice President Bharrat Jagdeo spoke about the proposals they have received from these operators. According to Jagdeo, operators have been proposing to work with the Government on setting up a national oil company, using the available oil blocks in Guyana’s waters.
“Many people are asking, when can we access blocks? In the past it was on a first-come-first-serve basis. But since we’ve found oil, we’ve changed the policy. We’ve made it clear that we’ll either go to an auction sometime in the third quarter of this year, with or without seismic done on our part.
“That decision still has to be made in Government. Or alternately, use those blocks to form a national oil company. Because we’ve had some proposals from people in this room – large operators – to work with the Government in the national oil company and utilise the remaining blocks,” he said.
The Vice President assured that all those decisions would be made by the third quarter of this year. But lest there be any uncertainty over the Government’s careful approach to allowing exploration in new oil blocks, Jagdeo emphasised that the Government was in full support of accelerated exploration.
“To offer clarity, by the third quarter of this year all of these decisions would be made. We’ll either make a decision that we’ll be part of a national oil company or we’ll tender them with or without seismic,” Jagdeo said.
“In Guyana’s case, we support accelerated exploration. We’re making it clear. And our incentive regimes will reflect that support. And you will see measures taken in Guyana, not just to encourage the existing holders of concessions to move swiftly to exploration, but, at some point in time, the remaining blocks (can be explored),” he added.
Countries getting into the business side of oil and gas is nothing new. In neighbouring Brazil, Petrobras is a well-known example of a State-owned oil company. Venezuela also has its own State-owned oil company, Petroleos de Venezuela (PDVSA). There is also the Petroleum Company of Trinidad and Tobago Limited (PETROTRIN).
However, the latter two companies have not fared well, with PETROTRIN closing its refinery and laying off thousands and PDVSA closing and then reopening its own, amid Venezuela’s economic meltdown.
Guyana has long been expected to go out and auction oil blocks, both untapped and relinquished. Considering the more than 25 oil finds that have been made by oil giant ExxonMobil in the Stabroek Block, the country is likely to be in a good position to leverage the value of those blocks when the context of the global oil and gas industry is considered.
The relinquishment clause is typically included in contracts so that companies can relinquish a portion of the block when the renewable period is up, thereby allowing other companies to buy into the respective blocks.
For the Stabroek and Canje Blocks, operators are required to relinquish 20 per cent of their blocks after the first renewal period; while those of the Demerara and Corentyne Blocks are expected to relinquish 15 per cent within this period.
The Kaieteur Block’s relinquishment provision is said to be 25 per cent, then 20 per cent by the first renewal; with the Mahaicony and Roraima Blocks at 25 per cent. By the time of the first renewal for the Orinduik Block, the operators are not expected to relinquish any portion.
Last year, ExxonMobil had applied to the Government for a one-year extension before it would be mandated to relinquish portions of the Stabroek block, where it has made a plethora of discoveries. In its application, Exxon had cited the effects of the COVID-19 pandemic. Guyana Times understands that this request is still being considered.
