Portion of Exxon-led blocks up for grabs after first oil

Jul 07, 2019 News

After a certain time has passed, Guyana’s petroleum laws dictate that oil companies have to give up at least 20 percent of the licensed area they are allowed to explore or develop. This exercise is referred to as relinquishment but it only kicks in when the license reaches the time for renewal, which is at the end of four years.
There are six major blocks offshore Guyana. These will be up for renewal after first oil commences in 2020. They are the Roraima Block which is operated by Anadarko; the Demerara Block operated by CGX Resources Inc.; the Kanuku Block operated by Repsol, Total and Tullow; the Orinduik Block led by Tullow, Eco Atlantic and Total; and the oil-rich Stabroek Block which is operated by ExxonMobil’s subsidiary Esso Exploration and Production Guyana Limited (EEPGL), Hess and CNOOC/NEXEN.
The foregoing blocks are up for renewal at different dates with some being in 2020 and others in 2022 to 2023.
(The Chart attached to this article gives a breakdown of the different dates each block would be ripe for renewal and subsequent relinquishment.)
Once the portions of these blocks are relinquished, the government can choose to auction them.
The license for the Canje Block which is in the hands of Mid-Atlantic, JHI Associates, Total and ExxonMobil’s subsidiary EEPGL is way past its relinquishment period. Twenty percent of this block should have been given up by Exxon and its partners since March 4,last.
But the authorities continue to be silent on why the relinquishment provision is not being aggressively enforced.
According to the Production Sharing Agreement (PSA), 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, 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 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 6,021 km. That is comfortably more than two times the size of Region Four (Demerara-Mahaica).
Mid-Atlantic, since acquiring the block in 2015, got several companies to buy into the block. The first to cut a deal was JHI Associates Inc.
Like Mid-Atlantic, JHI has zero experience in the oil industry. It has 17.5 percent interest in the Canje block. French oil major Total was able to buy 35 percent of the working interest. ExxonMobil which is the lead operator on the Stabroek Block was able to get a 35 percent interest in the Canje concession too. This works out in Exxon’s favour as Canje is strategically located next to the oil rich Stabroek Block. Mid-Atlantic continues to hold on to a mere 12.5 percent.

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