Guyana’s laws provide for competitive bidding in petroleum sector – IMF

Dec 29, 2017 News

---

 

The International Monetary Fund (IMF) recently noted that while Guyana grants licences for the oil sector on a first-come, first-served basis, it may not be such a bad idea to keep in mind, that there are provisions for competitive bidding.
The global body said that this is provided for in Guyana’s Petroleum Exploration and Exploration Act of 1986 and subsidiary regulations. The Mission said that this provision is yet to be used. It reminded, however, that the authorities here have found it beneficial to employ the competitive bidding procedure in the mining sector.
Additionally, Government’s adviser on the Petroleum Sector, Dr Jan Mangal has advocated that given the discovery of the ExxonMobil Liza well, the process of competitive bidding should be used in the award of oil exploration leases as opposed to a “one-on-one negotiation” or “open door” method.
With leases being awarded through a “one-on-one negotiation” Dr. Mangal in a letter to the press explained that the Ministry of Natural Resources negotiates directly with the interested party. He opined that there is a very serious risk of corruption with this method due to the lack of transparency and accountability.
He said that most countries have abandoned this method, as experts recommend against using it. Dr. Mangal said that Guyana should no longer be awarding petroleum acreage via one-on-one negotiations since the Liza discovery in 2015.
The Petroleum adviser said that after the Liza discovery, Guyana was in a position to use the method of “competitive bidding” for award of leases. He said that the Liza discovery de-risked Guyana, and as a consequence, all the major oil companies recognize that there is oil in the country.
Dr. Mangal said, “All the oil companies will be interested in bidding for leases in a transparent way, which ensures that Guyana incorporates market forces to maximise its share. The petroleum adviser’s position has consistently maintained that competitive bidding is indeed the best approach for Guyana.”
He continued, “In a direct correspondence from May-2017 with one such oil company attempting to acquire acreage via one-on-one negotiation, it was indicated clearly to them that: ‘Now that Guyana is on the radar post Liza, it is my personal view that all future acreage should be leased in a way which maximizes benefit to Guyana, hence in a market-orientated way, by an open bid round to ensure competition. And acreage should not be negotiated one-on-one between the Government and a prospective developer.”
The adviser added, “The risk of government friends and family illegally obtaining leases will be significantly reduced if an independently managed and well audited competitive bidding process is used…”

GGMC
The website of the Guyana Geology and Mines Commission (GGMC) also acknowledges that competitive bidding can be done in the petroleum sector.
According to the website (http://www.ggmc.gov.gy/main/?q=divisions/petroleum) Guyana is divided into two Petroleum Basins named Guyana and Takutu, respectively. The Guyana Basin is further divided into two basins, Onshore and Offshore.
GGMC on its website notes that the deepest part of the southern “boundary” is some 150 miles from the Guyanese coastline. NABI Oil And Gas, Inc. and ON ENERGY Inc. are companies that have concessions within this part of the Basin.
Within the Onshore Guyana Basin, there was a chance of these blocks being subjected to competitive bidding. GGMC stated, however, that this does not take away any one’s prerogative to apply for concessions within this area. The Commission went on to state that there were 13 wells drilled within this part of the Basin from 1916 to present day. Only Rose Hall-1 drilled in 1941 and Drill-1 in 1967 had oil shows.
The eastern part of the Onshore Guyana Basin has the largest thickness of sediment reaching some 2,500 m. GGMC says it should also be noted that the gas found on the coast is nearly all biogenic, with a very small area yielding thermogenic gas.

OFFSHORE GUYANA BASIN
According to GGMC, REPSOL, ANADARKO, ESSO/HESS/NEXEN, Mid-Atlantic Oil and Gas, Inc., RATIO Energy/Guyana Ltd and CGX Resources Inc. have petroleum concessions in this part of the basin. GGMC said that presently, a number of companies are negotiating for concessions in the offshore Guyana Area.
On the aspect of Offshore Guyana Basin, from the nearshore to around 80 miles to the north, the seabed is generally on the continental shelf then it moves to the slope, and as one gets further, it reaches the deep-water area.
The entity said that from the northwest (where the Anadarko concession is) to the Northeastern area depths can be from 1,000 feet to more than 10,000 feet. This area is known as the “ultra-deep waters”. In May 2015, ESSO made a significant discovery of petroleum while drilling in its Stabroek Block.
Prior to the ESSO discovery, GGMC said that the “best” well has been Karanambo-1 well drilled by Home Oil in the Takutu Basin in 1982.

TAKUTU BASIN
Located in the southwestern area of Guyana lies the Karanambo-1 well which was drilled in 1982 by Home Oil Company. GGMC says on its website that this was the best prospect drilled within this Basin. A small amount of light crude was accrued. Tests conducted on samples from Karanambo-1 found that the oil was of good quality (420API) and of a “sweet” variety, that is, it contained less than 0.5% hydrogen sulphide.
However, its geological characteristics were mainly naturally fractured reservoirs, thus proving more difficult to find commercial petroleum than regular reservoirs. The other wells drilled in the Takutu are Lethem-1 (1980), Turantsink-1 (1992) and Apoteri K2 well (2011).

---

---