Work obligations for Guyana’s oil blocks almost nothing by industry standards - University of Houston Instructor

Work obligations for Guyana’s oil blocks almost nothing by industry standards – University of Houston Instructor

Jun 29, 2019 News

Upon considering the work obligations companies have to fulfill when they acquire a licence for one of Guyana’s oil blocks, University of Houston Instructor, Tom Mitro says he can only describe it as being “almost nothing” by industry standards.

University of Houston Instructor, Tom Mitro

His comments in this regard, follow an examination of the Production Sharing Agreement (PSA) Guyana signed onto with ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), and its two other partners, Hess and CNOOC for the Stabroek Block which is 6.6 million acres.
Mitro said, “For a block this size, the minimum work obligations under Section 4.1 are almost nothing – only one exploration well is required every three to six years to justify extending the permit for up to 10 years. That is a very minimal level of commitment by industry standards, especially for a permit of this immense size. For much smaller licences, there is usually a requirement of at least one well every one to two years in order to maintain the licence.”
Kaieteur News examined several PSAs between ExxonMobil and Liberia as well as Hess and Ghana and just as Mitro stated, the work commitments by far exceed what is within Guyana’s PSA with the Stabroek Block operators.
The same poor work obligations can be found in several PSAs Guyana has with other firms.
The Canje Block Production Sharing Agreement is another prime example in this regard. In this case, the contractor is expected to carry out a minimum work programme in the initial four-year period of having the licence. That four-year period is divided into two phases.
Phase one consists of 18 months and requires the contractor to get all available geological data and conduct research at the local and regional level to better understand the complex features of the Guyana-Suriname basin. In addition to this, a minimum of 1500 line km of 2D seismic is to be acquired, processed, and interpreted to define possible prospects.
Phase Two consists of 30 months. During this time, the contractor is expected to merely acquire, process, and interpret a minimum of 500 square kilometres of 3D seismic to identify drilling targets and complete a geotechnical/pre-drilling survey.
The Canje Block PSA states that at the end of the initial four years, the Contractor shall elect either to relinquish the entire contract area or relinquish 20 percent of the contract area which spans 6021 km. That is comfortably, more than two times the size of Region Four (Demerara-Mahaica).
Furthermore, the renewal period was due since March 4, last. However, the relinquishment provision is yet to be enforced by the government.

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