Offshore Licences to small companies satisfy nation’s laws – GGMC Commissioner

Oct 06, 2019 News

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– Favours fine-tuning existing framework for attracting, vetting other investors

By Kiana Wilburg

Guyana’s offshore basin is teeming with exploration and development activity. A huge portion of that comes from well known super major, ExxonMobil, which operates the Stabroek Block. But Exxon is no longer the only key player in the game.

Recent discoveries on the Orinduik Block have placed the spotlight on newcomers like Eco Atlantic which managed to attract a consortium of industry experts and two other oil majors, Tullow Oil from the UK and Total which is headquartered in France.
In becoming one of the significant players in the basin, questions have been raised about whether these small firms which do not have the track record of majors like Exxon in finding and developing oil and gas, should even be given a chance to do exploratory work for Guyana’s mineral wealth in the first place. The big question has always been, ‘Isn’t this risky business?’
In an interview with Kaieteur News, Commissioner for the Guyana Geology and Mines Commission (GGMC), Newell Dennison attempted to answer this question, stating that Guyana’s laws does not close the door to those who can bring the financing to support a work programme while steering other petroleum giants to Guyana’s basin.
A perusal of Guyana’s Petroleum Exploration and Production Act says, “No licence shall be granted to an individual unless he is a citizen of Guyana or to a body of persons, unless it is – (i) a company; or (ii) a corporation. A licence may be granted to two or more persons associated together in any form of joint arrangement, if each one of them is qualified to hold the licence under subsection (1).” (See link for the Act:http://parliament.gov.gy/documents/acts/8170-act_no._3_of_1986_petroleum_(exploration_and_production)_act_1986.pdf)
Dennison said that newcomers, particularly the small companies which were granted licenses, received same in accordance with the foregoing law.
He further noted that apart from this, GGMC even went above and beyond by doing due diligence and holding several rounds of discussions regarding the proposal and work plan of the small companies as it relates to raising financing and attracting more operators.
The GGMC Commissioner said, “We have entertained people who did not have an established presence like other majors but, they came and were able to bring the expertise and a solid financing programme to the table.
CGX is a typical example of that. When it came, it brought experts who were well known in Calgary; it brought the financier, John Cullen, and was able to say, ‘while we are not a company that has 40 years experience in the game, we are going to form this consortium which has cumulative experience in drilling, geology, business, geophysics etc.’ and that is one way we have been able to get people to the table in the early stages to explore Guyana’s basin.”
Looking to awards made after the 90s, Dennison pointed to the offshore concession that was granted to Ratio Petroleum of Israel and Ratio Energy Limited in Guyana. The Commissioner noted that Ratio was in talks with Government for the Kaieteur Block licence since 2012.
He said, “Their application had been in the pipeline for a long time…They came with their people and put their proposal to us and our team hammered it out to a T. After rigid due diligence, passing our litmus test, we were satisfied that they were legitimate, that they were going to do legitimate work and attract the funding and oil majors to get the job done.
And this was way before we even conceived the notion of becoming an oil nation. They were also willing to take risk, knowing that they could only explore 40 percent of the block.”
Today, the Kaieteur Block is operated by ExxonMobil and preparations are on stream for its first wild cat well in 2020.
Speaking to Eco Atlantic which acquired a small concession, the Orinduik Block in 2016, Dennison said that like Ratio, this company was able to provide a solid programme of funding and attracting the expertise to upkeep its work plan.
With the aforementioned as his premise, the Commissioner noted that a model which allows for super majors and new entrants is not new to Guyana. In fact, it is still used in many parts of the world. Dennison said that the model has proven to be to Guyana’s advantage given the slew of discoveries that have unfolded.
Be that as it may, Dennison noted that he would support future improvements to the existing framework given the new era of oil discovery that Guyana is firmly cemented in.
In an invited comment, University of Houston Instructor, Tom Mitro, noted that when the government has tried and has had difficulty in attracting interest from larger more experienced oil companies, sometimes they will award blocks to small, newly formed companies.
Like Dennison, Mitro stressed that this is not unusual or necessarily bad on its own provided that due diligence is done to keep out those who are out to abuse the process.
SMALL COMPANIES-GLOBAL PERSPECTIVE
Research conducted by this newspaper also revealed that as Dennison indicated, there are other countries which have been open to small companies being allowed to explore for oil.
In the United Kingdom, this practice is evident.
In one documented instance, the UK’s regulator, called Oil and Gas Authority offered awards to a broad spectrum of companies inclusive of oil majors and new entrant companies to explore the UK’s continental shelf. (SEE LINK FOR MORE DETAILS: https://www.offshoreenergytoday.com/uk-offers-123-offshore-licenses-to-61-oil-gas-companies/)
Last March, the Economic Times reported that in India, little-known private companies won 13 of 23 licences to develop oil fields. (SEE ATTACHED LINK FOR FULL STORY: https://economictimes.indiatimes.com/industry/energy/oil-gas/less-known-private-companies-win-13-licenses-to-develop-small-oil-fields/articleshow/68220825.cms?from=mdr)

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