Guyana not “in rush” to draft new oil contract

May 13, 2022 News

– Natural Resource tells international media

Kaieteur News – Minister of Natural Resources Vickram Bharrat has reiterated Government’s position that it is in “no rush” to develop a new production sharing agreement (PSA) for it’s offshore oil development. Be that as it may, the Kawa-1 light oil and gas discovery in the country’s Corentyne Block may very well see a new agreement being signed with developers, Canada-based CGX Energy Inc. and its partner, Frontera Energy Corporation in the near future.

Minister of Natural Resources Vickram Bharrat

This was related days ago by Bharrat during an exclusive interview with international media house, Reuters. Bharrat was at the time attending the Offshore Technology Conference (OTC) held in Houston, Texas when he informed that Guyana is also looking for a long term arrangement with “the ideal partner” to market the country’s oil.
After a more than 20 year search, the joint venture by CGX Energy and Frontera Energy announced in January that it had found crude in its Kawa-1 well in the Corentyne Block. Additionally the company is expected to drill its Wei-1 exploration well later this year. The Minister said however that this is only the second well for CGX. “So I would say, in my own estimation, that in about three years from now, once everything goes well in terms of exploration, we might be ready to deal with CGX to sign a PSA,” the minister said.
Vice President Bharrat Jagdeo had said in February that the government would be seeking better terms to increase its benefit in the country’s Production Sharing Agreement (PSA). While the Vice President did not divulge much details, he had mentioned some of the issues that arose relating to royalty rate and ring fencing. “All of those issues have to be looked back at,” including tax treatment. Issues concerning ring fencing, tax payments and insurance coverage are among some serious matters arising from the current agreement the government has with ExxonMobil and would be looking to correct with CGX.
In fact, pressure continues to mount locally for the renegotiation of the oil deal to ensure Guyana gets better terms for its oil endowments. So far, these calls have fallen on deaf ear.
The Natural Resource Minister told the media however that Guyana aims to prioritize creation of an oil and gas regulatory body. “We have started some of the work on designing a model PSA according to internationally accepted standards. However, there is no rush to conclude it immediately because we don’t see any other companies applying for a PSA just yet.”
Companies currently exploring in Guyana have in recent years signed or extended licences to complete drilling. The new PSA would be needed to move projects to the development phase.
Bharrat told the international press however, that the process for drafting a new PSA model will be similar to the mechanism for approving Guyana’s local content policy. A high-level panel will be nominated for the task and domestic and foreign consultants will be involved.
In the meantime, when it comes to the “ideal partner”, the government plans to have ready this year an energy regulatory agency and probably a state oil company that could offer partnerships in exploration areas returned by other firms or for new blocks yet to be put on the table. On Guyana’s to-do list there is also a competitive tender to select the company that will market its share of oil. Saudi Aramco had been hired to market Guyana oil endowments, and that contract expires in September.
“We are looking for long-term arrangements, for the ideal partner for marketing and getting better benefits,” Bharrat said, adding the nation aims to save as much as possible on trading fees. It was noted however that Indian state refiners that have shown interest in a government-to-government agreement to buy Guyanese oil after testing the Liza sweet light crude last year, would also have to participate in the tender.

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