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Exxon wants new oil blocks despite higher royalties and taxes for future contracts
Kaieteur News – Though the Guyana Government has introduced a suite of higher fiscal terms for contracts governing the award of new blocks, such as a 10 percent royalty and the payment of corporate and income taxes, it has not dissuaded ExxonMobil Corporation.
In fact, Alistair Routledge who serves as President of Exxon, affiliate, Esso Exploration and Production Guyana Limited (EEPGL), confirmed on Friday that the subsidiary is registered for the bid round.
Routledge said, “We are always interested in new acreage and clearly where we had some success it brings a certain degree of interest and we should be knowledgeable of it.”
He added, “ExxonMobil has registered for the bid round and it is reviewing some of the data with the government.”
The company head said Exxon is waiting on the final terms of the new model Production Sharing Agreement that will be used for these blocks “and when we have all of that, we will be in a position to make a decision on whether we bid or not.”
Last year December, President Dr. Irfaan Ali launched the licensing round, noting that it will feature 11 shallow water blocks and three deepwater concessions. There is a minimum signing bonus of US$20M for deepwater blocks and a minimum of US$10M for shallow water.
Successful companies would be required to pay a 10 percent income tax, 0 to 0.75 percent on property tax, 50 percent profit sharing, be subject to a 65 percent cost recovery ceiling, pay an annual rental fee totalling US$1M also an annual training fee amounting to US$1M.
According to government, shallow water blocks have a five-year exploration phase and a 20-year production phase, with a possibility of renewal based on negotiated terms with the government. Deepwater blocks have a 10-year exploration phase and a 20-year production phase, which may be extended for an additional 10 years.
All blocks will have a relinquishment obligation of 50 percent of the original area at the end of the initial period, and a further 50 percent at the end of the first renewal period, excluding areas designated for development.
Though the foregoing terms are significantly higher when compared to what obtains in the lopsided 2016 Stabroek Block PSA, Exxon was still lured to participate.
The draft model PSA is expected to be released on Monday, February 13, 2023, with the consultation period lasting for 15 days, to close on February 28, 2023.
The final contract terms are expected to be published on March 8, 2023, with the government taking and evaluating bids from April 14 to May 5, 2023.
The tender is open to any company or consortium, irrespective of nationality, that can comply with the stated health, safety, environmental, technical and financial requirements.
Kaieteur News understands that the stated intent of the tender is to encourage open competition for all 14 blocks; however, Government has said it retains the discretion to limit any award to a maximum of three blocks. Companies tendering for more than one block must therefore submit their bids in the order of preference.
There is also a mandatory participation fee of US $20,000.00 per block per participating entity, even when participating through a consortium. The deadline to pay the fee is April 7, 2023. Access to the data room for the blocks is conditional on payment of the participation fee.
On May 31, 2023 government said it will announce the award of the licenses for new blocks.
The Natural Resources Ministry has said that the country’s offshore basin has captivated the attention of the global oil market participants. Labelled as “the gateway to the world’s fastest-growing super basin over the last four years,” Guyana’s offshore is estimated to have potential resources in excess of 25 billion barrels of oil equivalent (boe) and an estimated reserve in excess of 11 billion boe.
“The licensing round represents an opportunity for international and local companies to access Guyana’s offshore acreages for future development in this emerging energy market. The licensing round importantly allows the government of Guyana to create and administer an improved fiscal and regulatory framework that is driven on good international oil field practices and standards,” the ministry said.
- Alistair Routledge, Esso Exploration and Production Guyana Limited (EEPGL), ExxonMobil, Government, Guyana
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