“Face-to-face” bidding process for Liza crude is to Guyana’s advantage

“Face-to-face” bidding process for Liza crude is to Guyana’s advantage – Energy Dept. Head

Dec 17, 2019 News

By Kiana Wilburg

Since international news agency Bloomberg released a report last week that the Government of Guyana would be engaging in a “face-to-face” bidding process with selected companies for the sale of the nation’s crude, tensions in some quarters have been high.

Energy Department Head, Dr. Mark Bynoe

There was speculation that such a course of action opens opportunities for corruption or back-room deals.
But Energy Department Head, Dr. Mark Bynoe categorically stated at a press conference yesterday that nothing could be further from the truth. In fact, the Director of the Department stressed that the arrangement which is expected to conclude this week, is to the country’s advantage.
Dr. Bynoe said that the face-to-face bidding with companies which includes the likes of ExxonMobil, Hess Corporation, CNOOC/NEXEN, British Petroleum, Chevron, Shell, Total, and ENI for the first three lifts of Guyana’s crude, will help to set national benchmarks.

Crude Marketing Specialist, Virginia Markouizou of RPS Group

He told the media that the companies were selected on the basis that they have a global refining footprint and integrated oil value chain as well as being in a position to support all operating procedures for the three cargoes. He said, too, that given Guyana’s inexperience, coupled with the impending early dates for Guyana to take its share, which is February 2020, this introductory phase with selected companies was the best option.
Dr. Bynoe said, “We are seeking to protect the value of the resource by going this route. The true economics is still to be determined and stabilization will come after several lifts. Guyana also needs to develop a quality and quantity standard. All of these are considerations which guided the decision that was taken. We are committed to doing this in a transparent and accountable manner.”
WHO SELECTED THE COMPANIES?
One of the burning questions on the minds of media operatives was for the Department of Energy to explain who was behind the selection of the companies for the bidding process.
Dr. Bynoe said that the department relied on the advice of its experts, one being Crude Marketing Specialist, Virginia Markouizou of RPS Group, who was hired in November last.
Markouizou indicated that all of the international oil companies were invited on the basis that they have an integrated value chain.
Markouizou said, “When we say integrated value chain, I mean that they have vast experience, they are known to the market and …We reached out to quite a range of them, and they all have the same characteristics. They not only have vast experience in oil, but have a global refining footprint, and this means they are very much aware of the intricacies of introducing new grade into the market, and they have done this many times in the past in supporting governments all around the world…”
Importantly, the Crude Marketing Specialist said that the companies selected can help Guyana introduce the grade into the market in a very standard way given their experience. She stressed that the Department is trying as best as possible, to prevent the Liza grade from succumbing to volatility.
Markouizou said, “…We want an environment where there is standardization and stabilization. The period for this type of stabilization takes about six months and we decided that it was prudent, to shorten it to three cargoes, so the first three months of production of the grade will be tested in refining systems with long experience in introducing new crude grade.”
NO PREVIOUS DISCLOSURE
Dr. Bynoe was also challenged by the media to explain why the nation had to wait on a Bloomberg report to understand what crucial decisions are being taken regarding the nation’s patrimony.
To this, the official said that there are some issues which the department can speak on in the initial stages or after. In this instance, he said that it was the intention of the department to inform the nation when the deal was sealed.
He said, “We were aiming to come to you when the matter was concluded and not during, because it can weaken the government’s negotiating position… I was hoping to have a wrap up to say this is what was done…”
“PART OF THE TRUTH”
Even though the Department of Energy officials contended that its approach is in Guyana’s best interest, the media still demanded an explanation on why Bloomberg would find its handling of the issue to be “unusual.”
Markouizou was quick to note that Bloomberg only gave half of the story.
She said, “Bloomberg is an international news agency and what they are quoting is part of the truth. Trading of the commodity is a very global, transparent and in-the-minute business. It happens in front of screens and it happens through phones…If you were introducing the third, or fourth or fifth grade, then telephone conversations would have been sufficient.”
The Crude Marketing Specialist argued that what Guyana is seeking to do is build relationships. She said that it goes beyond price negotiations, while stressing that the companies engaged will provide valuable feedback on the quality of the crude while helping to introduce it to the international market. For such an important task, a telephone call just wouldn’t cut it, the official said.
She further noted that the oil would be sold Freight On Board (FOB) which means that the government will not bear any costs associated with freight.
PREMATURE
The Crude Marketing Specialist explained that after the introductory phase, the Department will issue a public request for proposals (RFP) next year, for marketing services for Guyana’s crude. It was explained that doing the RFP at this stage would be premature, since the quality of the crude is still to be known.
She said, “The RFP is a marketing contract for Guyana’s oil and it is going to be at least for one year with an option to renew depending on the performance of the marketer. It is going to be based on marketing fee. Right now, this is an introduction phase and the markets, the traders, are all looking at us, trying to see how we will perform, and how the grade will perform in the initialization into the market.”