Govt. pushing to auction relinquished portions of oil blocks next year

Nov 02, 2021 News

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Kaieteur News – Even though Guyana is still without the legislative and regulatory framework to effectively manage its quickly growing oil sector, and its capacities are stretched thin each day in monitoring ExxonMobil’s Stabroek Block operations, the government has signalled its intention to welcome more operators into the offshore basin by next year. Making this disclosure yesterday
during an engagement with members of the local media fraternity was Vice President, Dr. Bharrat Jagdeo.

He noted that by the third quarter of 2022, the government will be looking to auction new blocks which will now require that it aggressively enforces the relinquishment provisions in the contracts it has with companies such as ExxonMobil, Tullow, and Repsol.
The Vice President said, “We have been caught up with now trying to put in place the architecture for the management of the industry but now we have to move to enforcement and then auctioning.”
To go to an auction however, Jagdeo said the government would have to make several policy decisions.
“We will have to get someone who has done this before. We have to get technical help. Secondly, we have to also make a decision like some countries are doing, whether we want to invest, like Suriname is doing, to shoot 3D seismic and then auction the block with seismic data which gives us a higher price.”
If it decides against this, Jagdeo said the government could decide to just auction the areas as is since it would ultimately have to stand the costs associated with the 3D seismic survey.
Another key consideration he said, is whether government should preclude existing companies such as ExxonMobil to be part of the bidding round. It should be noted that ExxonMobil is the only company which has a hold on the largest acreage in the Guyana basin. If it acquires more, it would only serve to increase its monopoly.
“So we have to make that policy decision…,” the Vice President noted while adding that if there is need to amend laws in the future to allow for this auction to take place then it would certainly occur.

EIGHT MONTHS LATE
It was last month that this newspaper exposed that the Kaieteur Block which is operated by ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) is more than eight months beyond the contractual timeline for a portion, 45 percent to be exact, to be relinquished.
The massive offshore concession was awarded in April 2015 to Cataleya Energy Corporation (CEC) which was formerly Ratio Energy Limited and Ratio Guyana Limited, a subsidiary of Ratio Petroleum Energy Limited Partnership headquartered in Israel (Ratio Petroleum).
Subsequent to the Upper Cretaceous play-opening at the Liza-One discovery in May 2015, a farm-in agreement executed with ExxonMobil, along with various other arrangements, saw the effective date of the Kaieteur Petroleum Agreement being amended from April 2015 to February 2017.
With this in mind, it should be noted that a prospecting licence in the oil sector is up for renewal after four years. During that period, the company has to adhere to a work programme, and at the conclusion of same, it can elect to relinquish all or a portion of the block.
The PSA, when perused by Kaieteur News, notes at Article Four, which deals with Exploration Programme and Expenditure Obligation that the Contractor shall carry out minimum work commitments, during the periods into which Prospecting Operations are divided. The agreement notes that the initial period of four years shall be divided into two phases, each having duration of 24 months.
In the first phase, the contractor shall acquire all available 2D seismic data from previous surveys conducted over the Contract Area, process and/or reprocess as necessary, and interpret same. At the end of phase one of the initial period, the Contractor shall either elect to relinquish the entire Contract Area, except for any Discovery Area in respect of which the Minister is informed under section 30 of the Act and the area contained in any Petroleum Production Licence; or subject to Article Five, relinquish 25 percent of the Contract Area and commit to the Work Programme in phase two.
During phase two of the initial period, the Contractor shall conduct a survey to acquire a minimum one thousand (1,000) line kilometers of new marine 2D seismic and/or five hundred square kilometers (500 sq. 1cm) of new 3D seismic over the Contract Area, process, and interpret same.
At the end of the initial period of four years, the Contractor shall elect either to relinquish the entire Contract Area or, subject to Article Five, relinquish 20 percent of the Contract Area except for any Discovery Area in respect of which the Minister is informed under section 30 of the Act and the area contained in any Petroleum Production Licence and renew the Petroleum Prospecting Licence for a further period of three years.
It therefore means that at the end of the first four years, ExxonMobil should have handed over to the State, 45 percent of the Stabroek Block. This should have been done by the PPP/C Government since February.
In the meantime, ExxonMobil has applied to the Environmental Protection Agency (EPA) to be authorised to drill 12 wells in the Kaieteur Block which is located in deep water over 200 kilometres northeast of the coastline of Georgetown, Guyana, and adjacent to the northern boundaries of the Stabroek and Canje blocks. Approval from the Ministry of Natural Resources and Guyana Geology and Mines Commission will also be obtained.
The Kaieteur Block is currently operated by ExxonMobil’s subsidiary, Esso Production & Exploration Guyana Limited, in partnership with CEL, Ratio Guyana Limited and a subsidiary of Hess Corporation.

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