Tullow given special exemption from relinquishing oil block

Jan 26, 2020 News

British oil major, Tullow Oil, has got a special exemption from a key aspect of the relinquishment provision in Guyana’s agreements with oil companies operating here.

Map showing the Orinduik Block (Tullow Oil, Eco Atlantic)

Relinquishment is an important feature of agreements with oil companies. It typically denotes an oil company relinquishing a portion of a block, when the renewal period for its agreement is up. This allows other exploration and production companies the opportunity to buy into those blocks.
In Guyana’s agreements, the first renewal date typically comes four years after the Block is initially awarded. After that, a second renewal period of three years typically follows. At both junctures, operators are expected to relinquish parts of their blocks.
However, a perusal of petroleum agreements awarded to companies doing business with Guyana shows that the contract governing operations on the Orinduik Block is the only agreement that lets the operator keep the entire block after the first renewal period.
Orinduik is a whopping 1,776 square-kilometre concession. Tullow owns a 60 percent operated interest. Eco Atlantic holds a 15 percent working interest and Total EP holds 25 percent. The special treatment given to Tullow and its partners on this Block is demonstrated in the following.
The Kaieteur Block is observed to have the most aggressive relinquishment provision, with two instances of relinquishment (25 percent, then 20 percent) required by the time the first renewal period is up. The operators of the Roraima and Mahaicony Blocks are expected to relinquish 25 percent of their blocks after the first renewal period.
The operators of the Kanuku, Canje and Stabroek Blocks are required to relinquish 20 percent of their blocks after the first renewal period. The operators of the Demerara and Corentyne Blocks are expected to relinquish 15 percent of their blocks after the first renewal period.
The operators of the Orinduik Block are expected to relinquish nothing after the first renewal period.
The text in the agreement reads “the Contractor shall not be required to relinquish at the end of the initial period any area of the original Contract”.
If the Orinduik Block was held to the same relinquishment terms as the other operators, a portion of it should have been relinquished earlier this month, on January 14.
This concession to Tullow Oil is extremely favourable, placed in a contract that has already been pegged to be even more unfair than the Stabroek block agreement by Opposition Leader Bharrat Jagdeo.
This is the very agreement which allows Tullow to recover the royalty it should be paying to the people of Guyana.
Why the relinquishment provision of this agreement steered away from the template for Guyana’s petroleum agreements is a mystery.