CGX holds on to prime oil blocks for 13 years without honouring agreement - VP Jagdeo

CGX holds on to prime oil blocks for 13 years without honouring agreement – VP Jagdeo

Oct 03, 2020 News

Kaieteur News – Vice President, Dr. Bharrat Jagdeo disclosed yesterday that a number of new companies are knocking on the door of the People’s Progressive Party/Civic (PPP/C) Government to engage in discussions on the exciting prospects of Guyana’s oil industry. In contrast, those exploration companies such as CGX Resources Inc., who have been awarded oil blocks but are not performing, will be in for a rude awakening particularly via rigid performance reviews.

Vice President, Dr. Bharrat Jagdeo

Speaking to members of the media fraternity at the Arthur Chung Convention Centre, Jagdeo said that CGX is one of those companies which would have been in receipt of offshore licences but has done little to no work to date. The concerned Vice President said that work on CGX’s Corentyne and Demerara Blocks are long overdue while adding that, “it has been 13 years since any work has been done.”
The former Head of State recalled that prior to 2007, CGX was awarded a Petroleum Licence in the offshore Guyana Basin but when efforts were initiated to drill the Eagle-1 well, it was prevented from doing do by Surinamese naval gunboats. Legal proceedings commenced at the International Tribunal on the Law of the Sea (ITLOS) to resolve the maritime border dispute with Suriname and in 2007, the Tribunal awarded Guyana at least 93% of the disputed area.
Following this settlement, CGX was awarded a Petroleum Licence on November 27, 2012 for the Corentyne Block and then in February 13, 2013, the company was awarded a Licence for the Demerara Block. Since these awards, Jagdeo alluded to his expectation that significant work should have been done.
The Production Sharing Agreement for the Corentyne Block stipulates that for the first four years, at least two wells should be drilled. CGX did honour this part of the work commitment when it drilled the Jaguar-1 and Eagle-1 wells in 2012, both of which were subsequently abandoned.

Map showing CGX’s blocks

When the license was renewed in 2016, CGX was required to drill at least two wells but that was not done. Despite this, the APNU+AFC regime allowed for the licence to be renewed in 2019 for another three years. The licence is due for renewal in 2022.
As for the Demerara Block, CGX was required to drill one well and complete one well drill within the first four years of having the licence. That well was not drilled. When the licence was renewed in 2017, it was expected that two wells would be drilled but that commitment is yet to be fulfilled.
US$33M RECEIVED
Almost two years ago, CGX had announced that it had inked an agreement with another Canadian firm, Frontera Energy Corporation (FEC), to pursue exploratory works in the Corentyne and Demerara offshore blocks.
According to Professor Suresh Narine, Executive Chairman for local subsidiary CGX Energy, the agreement was designed to provide CGX with significant working capital and liquidity since it had faced significant cash flow problems over the years. Following the signing of the agreement, Frontera acquired a 33.33% working interest in the two blocks in exchange for a US$33.3 million signing bonus to CGX.
Frontera agreed to pay one-third of the applicable costs plus an additional 8.333% of CGX’s direct drilling costs for the initial exploratory commitment wells in the two blocks. Frontera and CGX had also agreed to arrangements to provide additional financial support for CGX.