Vice President Dr Bharrat Jagdeo has disclosed that London-based Tullow Oil has not formally notified the Government about its decision to sell its majority stake in the Orinduik Block offshore Guyana.
Earlier this month, Tullow announced that it has agreed to sell its 60 per cent total interest in the Orinduik Licence to Eco Guyana Oil and Gas (Barbados) Limited in exchange for a combination of upfront cash to the tune of US$700,000 and contingent consideration.
However, VP Jagdeo revealed on Thursday that while the Government has heard about this decision, the London oil company still needs to formally inform local authorities of this decision, in order to get approval for the sale.
“Two days ago, I spoke with [Natural Resources Minister] Vickram Bharrat, and at that time we had not received notification; and they [Tullow] need to notify us, because the approval has to be done by the Government of Guyana. But up to that point in time, we had not been notified about this. We’ve been hearing about it through the grapevines, but that has to come through…a formal process to us,” the Vice President stated.
Completion of this transaction between Tullow and its Orinduik Block partner Eco is expected to occur in the second half of 2023.
In an August 10 statement, Tullow said its decision to exit the Orinduik licence is in line with its strategy to focus on its high-return production assets in Africa and infrastructure-led exploration around producing hubs, and deliver its objective to unlock value in emerging basins.
Director Exploration, Non-Operated Assets and Decommissioning, Jean-Medard Madama, had stated, “This transaction is in line with our strategy to optimise our portfolio through opportunities to unlock value from our emerging basin licences, whilst focusing our capital expenditure on our high return-producing assets and growth opportunities around existing infrastructure.”
In 2019, Tullow drilled two exploration wells on the Orinduik licence, which yielded uncommercial oil discoveries. The first discovery in August 2019 was at the Jethro-1 well in the Orinduik Block. The well encountered 55 metres of net oil pay in a high-quality oil-bearing sandstone reservoir in the Lower Tertiary play.
This discovery was followed in September by the Joe-1 discovery in the Upper Tertiary play. The quality of the oil is heavy, however, and has high sulphur content – a variety of oil that is less economically viable than the light, sweet crudes found by United States oil giant ExxonMobil right offshore Guyana in the neighbouring Stabroek Block.
Nonetheless, Tullow recognises the material oil resource potential remaining in the Orinduik licence, and as such, the terms of the transaction allow Tullow to retain exposure to any potential future success in the region.
Based on the transaction summary, Eco will have to pay Tullow US$4 million if it makes a commercial discovery, and another US$10 million if Guyana issues a production licence, as well as royalty payments on future production.
It has been a rough few years for Tullow, which in 2020 was forced to write off US$1.2 billion in wells that were not financially viable. Included in the 2019 amount is US$60 million for three wells Tullow drilled offshore Guyana but could not continue working thereon.
The Orinduik oil block is just a few kilometres from ExxonMobil’s discoveries in the Liza and Payara fields in the oil-rich Stabroek Block.
With the acquisition of Tullow’s 60 per cent interest, Eco will now add to its existing 15 per cent working interest – making it the leading operator on the Orinduik licence with a now whopping 75 per cent interest. The remaining 25 per cent working interest is shared by a joint venture between Qatar Petroleum and Total E&P Guyana BV (TOQAP).
Meanwhile, in addition to its Orinduik assets, Tullow Oil also has stakes (37.5 per cent in a farm-in deal) in neighbouring Kanuku Block, which is operated by Repsol with a 37.5 per cent working interest. TOQAP holds the other 25 per cent interest in the Kanuku block.
During Thursday’s press conference, VP Jagdeo was asked about whether the Kanuku licence has gotten an extension, to which he responded in the negative.
The Vice President explained that apart from Canada-based CGX Energy, no other licence holder offshore has reached the period where their prospecting licence has been exhausted or expired.
Some six wells have been drilled in the Kanuku Block; those are: Carapa-1, Jaguar-1, Berbice-2, Abary-1 and Mahaica-1 and 2.
Earlier this month, it was revealed that Repsol is conducting environmental surveys at the Beebei-1 well site. According to a notice on August 4 by the local Maritime Administration (MARAD), the exercise commenced earlier in the month, and will conclude by the end of the month, utilising the OSV Atlantic Spirit vessel.
Repsol had drilled the Beebei-Potaro well last year and encountered good quality reservoirs in the primary and secondary targets, but they were water-bearing.
