CGX breached contract but Coalition Govt. still approved extension for three more years

Nov 09, 2020 News

…Demerara oil block

Kaieteur News – After being in possession of a licence for the Demerara oil block offshore Guyana for eight years, CGX Resources Inc., a local exploration company, has failed to drill a single well. According to the agreement it signed with Guyana’s government at the time on February 12, 2013, the company was required to drill at least one well within the first four years of having the licence. This was expected to be done after it conducted a new marine 3D seismic survey consisting of a minimum of 1000 square kilometers, as well as process and interpret data from same.
At the end of the four-year period, CGX was required to give up 15 percent of the contract area or the entire block and renew the licence for another three years. In 2017, it exercised the option to relinquish 15 percent of the block and renewed its licence for three years. It got the renewal approved even though it did not honour its work obligations completely.
Further to this, the petroleum agreement notes that if it acquires the renewal, CGX should drill two wells. Instead of honouring this, it approached the coalition regime in 2017 to approve a work programme with fewer obligations.
The Addendum states that between 2017 and 2020, CGX could simply conduct additional data processing and planning for an exploration well, after which it can elect either to relinquish the entire contract area except for any discovery area or commit to doing any additional processing and planning, while securing all regulatory approvals for the drilling of the first exploration well.
The Addendum also states that at the end of the first renewal period of three years, the company shall elect either to relinquish the entire contract area except or 25% percent of the block and renew for a second period of three years.
The APNU+AFC approved this work programme in December 2017 in spite of the fact that the company breached its commitments during the first four years of having the licence. It also gave CGX the option of not drilling a well until 2021.
CGX has since elected to relinquish 25 percent of the Demerara block and is currently awaiting approval from the Department of Energy for permission to hold onto the block for another three years.