Contract gives Minister special powers to allow Exxon to hold onto unused portions of Stabroek Block

Jun 16, 2022 News

– Provision differs for other oil blocks

Kaieteur News – According to Guyana’s laws governing the oil sector, companies are required to give up varying portions of their respective oil blocks to the State over a 10-year period. The first period of relinquishment occurs after four years while the second and third timelines occur after a period of three years each.

Maps showing the offshore blocks in the Guyana basin

All petroleum agreements for onshore and offshore concessions confirm to the foregoing stipulations except for one—The 2016 Stabroek Production Sharing Agreement (PSA).
This agreement only requires ExxonMobil’s subsidiary and operator, Esso Exploration and Production Guyana Limited (EEPGL) to return a portion of the oil rich, deepwater acreage after seven years. Most importantly, if the company is convincing enough, there is a provision that empowers the subject minister to let Exxon hold onto the entire block for much longer.
According to the provisions of the 2016 Stabroek Block Production Sharing Agreement (PSA), Article 4 – Exploration Programme and Expenditure Obligation states that from the effective date of the contract, June 27, 2016, the contractor has a minimum work programme to execute within four years. This means the first four years comes to an end on June 27, 2020. The PSA further states that the contractor, Exxon’s affiliate, EEPGL, shall within the first four years, complete the interpretation of any 3D seismic acquired in respect of the Contract Area and complete the drilling of a minimum of one exploration.
At the end of the initial period of four years, the PSA goes on to state, “The Contractor shall elect either to relinquish the entire Contract Area or renew the Petroleum Prospecting Licence (PPL) for a further period of up to three (3) years.”
With the contract renewed, lasting a period of three years (until June 2023), the agreement says the contractor shall drill one exploration well. At the end of the first renewal period of three years, the PSA states, “the Contractor shall elect either to relinquish the entire Contract Area, or renew the Petroleum Prospecting Licence for a second period of three (3) years…” Once renewed, this would take the PPL into June 2026, at the end of which the contractor has to relinquish the entire contract Area.
Come June 2026, however, the PSA states clearly that the Minister can extend the exploration period “pursuant to a showing of good cause by the contractor.”
It should be noted that no other agreement the nation has with other oil explorers has such a special provision. Such discretion is not even catered for in Guyana’s oil laws.
As Guyana prepares for its first bid round by the end of the third quarter, the government has said it will pursue aggressive relinquishment of offshore acerage. It therefore means that portions of the Corentyne, Kaieteur, Canje, Demerara, and Kanuku blocks would be up for grabs. Government has not confirmed if Block C which is in ultradeep waters and sandwiched between Exxon’s Canje and Kaieteur Blocks, would be part of the upcoming bid round.
Given the provisions for relinquishment in the Stabroek Block deal, investors will have to wait possibly another four to 10 years before any portion of this oil rich block can be part of future bid rounds.