‘Guyana lost big from giveaway of oil blocks’

Jun 19, 2022 News

– country could have earned more if fields were sold on the open market – Glenn Lall

Kaieteur News – Successive Governments of Guyana have come under heavy criticisms for their management of the country’s nascent oil and gas sector. From the giving away of oil blocks to the signing of a lopsided contract with ExxonMobil, citizens do not feel they will ever benefit fully from the resources.

Kaieteur News Publisher, Mr. Glenn Lall

One significant area that has come under scrutiny is the awarding of oil blocks – something which industry experts said should have been put on a public auction in the first place. It took the country more than five years after it discovered oil to be moving towards its first auction. Last week this newspaper reported that while the government has not disclosed which offshore blocks are set to be part of the nation’s first auction in the third quarter of 2022, based on its review of the respective Production Sharing Agreements (PSA) it has been ascertained that there will be five contenders. They include relinquished portions of the Kanuku, Corentyne, Demerara, Canje and the Kaieteur Blocks. Importantly, no part of the Stabroek Block would be included in the nation’s maiden bid round since the provisions of the 2016 contract only allow for 20 percent of the acreage to be relinquished after seven years. It therefore means that a portion of the oil-rich block would only be surrendered to the State until 2023.
The Kanuku Block which covers 1,937 km2 in the Atlantic Ocean within the Exclusive Economic Zone of Guyana is operated by Repsol. The company gave up 20 percent of the block this year in which it holds a 37.5 percent stake and while Tullow holds 37.5 percent and TOQAP, a company jointly owned by Total E&P Guyana B.V. (60 percent) and Qatar Petroleum (40 percent), holds 25 percent.
The Corentyne and Demerara Blocks are operated by Canadian explorers, CGX Energy Inc. and Frontera Energy Corporation. An independent Prospective Resource study of the two concessions by McDaniel & Associates Consultants Limited, noted that the concessions hold a combined median estimate of 4.84 billion oil-equivalent barrels. CGX has successfully relinquished parts of the Demerara and Corentyne blocks to the State. Like Stabroek, the Kaieteur and Canje oil blocks are operated by ExxonMobil’s subsidiary Esso Exploration and Production Guyana Limited (EEPGL). In the case of Kaieteur, 25 percent had to be relinquished since February 2021. This is yet to occur. As for Canje, 20 percent was relinquished in 2019.
Value of the oil blocks
Publisher of this newspaper, Glenn Lall, speaking during his Friday evening radio programme, The Glenn Lall Show, told his audience that the value of the country’s oil blocks could have played a major role in the livelihood of citizens today, “but they have disappeared in the wee hours into the hands of people that have left many questions unanswered, about who got them, how they got them, who are benefitting from them, where these people come from, and what expertise they have in the industry as to being in possession of these oil blocks. “ Lall believes had these blocks been sold on the open market, Guyana would have paid off the entire region’s debt; salaries could have been five times more than what they are getting now and money would have been rolling in like sand. “No Guyanese would have to go to bed hungry in this country – that’s the kind of money we already lost out on, just on the oil blocks,” the businessman stated.
Giveaway
The Canje Block for instance was awarded by the Donald Ramotar administration on March 4, 2015, days before that year’s General and Regional Elections, to a local company, Mid-Atlantic Oil and Gas. Similarly, the Kaieteur Block was awarded on April 28, 2015, just two weeks before the elections, and like the Canje Block, it was done based on the advice of former Minister of Natural Resources, Robert Persaud. Two companies received the block with 50-50 stakes – Ratio Energy Limited (now Cataleya Energy Limited) and Ratio Guyana Limited. The award of the oil blocks to the companies was especially concerning since the ultra-deep drilling is required for those blocks, a technique which only a handful of companies in the world have the technology, track record, and capability to execute. The red flags which have manifested in both situations include that the awards were given to unqualified companies, that the initial owners quickly flipped the blocks without doing any work, that they are incorporated in ‘secrecy’ jurisdictions, and that Guyana likely lost revenue due to the avoidance of an open, competitive bidding process.
Zooming in on a recent Extractive Industries Transparency Initiative (EITI) report, Lall drew attention to the fact that from 2019 EITI reported that Guyana has an oil block that was given away to a company that does not have one single employee. “Can you imagine something like that…a company has the Berbice oil block and does not have a single dog or cat working in the company. How is that possible and why that oil block is still in the hands of those people?
The Kaieteur News reported last week that of all the oil companies listed by the EITI in the report, only one entity had no employees for the 2019 reporting period. That company is ON Energy Inc., a wholly owned subsidiary of Canadian firm, CGX Resources Inc. On Energy holds the Berbice Block for which it signed an agreement with the State on February 15, 2013. The report notes that CGX has 30 male and eight female Guyanese employees. No expatriates were on its payroll for 2019. On February 12, 2013, the Government of Guyana issued a new Berbice Petroleum Agreement to ON Energy, comprising both Berbice and the onshore portion of the Corentyne Block, thus increasing the size of the acreage to 3,295 km2. Under the terms of the new Berbice deal, during the initial period of four years, ON Energy had an obligation to conduct an airborne survey comprising a minimum of 1,000 km2 and either conduct a 2D seismic survey comprising a minimum of 100 km2 or drill one exploration well. Four years later, the company contracted Exploration Technologies Inc., a Houston, Texas based geochemical survey company, to conduct a geochemical survey. The field survey started on October 27, 2018 and was completed on November 4, 2018. A total of 317 sample points and 49 blanks were taken. The survey covered a total area of approximately 391 km2.
Meanwhile, Lall lamented that the company “get your oil block free, holding on to it, making money from foreign investors on the oil block and telling us they can’t afford to drill a well. Can you imagine that? Can something like this happen anywhere else in the world? What do you say to a government, what do you say to the Opposition when you hear things like this…Was that just a shell company that the owners created for the purpose of getting [our] oil block?”
Mr. Lall mentioned that every application for an oil block comes with a plan, which details how the company will execute the work programme, how much money they have to begin the exploration phase, how many persons they will employ among other issues. “What happen here now, what did they present so that they get the Berbice oil block? Eh, or is a friendship thing?” Mr. Lall asked.
He said for months now he has been encouraging and begging citizens to confront leaders of this country as to what is happening with “our resources.” He said he has been gratified in recent times with some citizens taking up the challenge, referencing a female farmer from Bartica who questioned President Irfaan Ali about the status of the country’s oil blocks. “I keep insisting that all of you have the right to know what is happening with the blessings God Almighty has blessed us with, when it comes to our wealth: the gold, diamond, bauxite and timber fields along with those oil blocks out there. They are very, very healthy and wealthy for all of us future,” Lall concluded.