Jagdeo banking on ‘goodwill’ of oil companies to get more benefits for Guyana

Mar 09, 2023 News

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…tells Texas conference “Guyanese now more open to Exxon and others”

Kaieteur News – Vice President Bharrat Jagdeo is of the view that oil companies that wish to operate in Guyana would do extremely well but the future of the imminent prosperity would have to be shared and that this would require those operators to “work with us a bit more.”

He made the disclosure this past week during a public engagement at the annual CERAWeek, Oil and Gas forum, held in Texas, USA, and organised by S&P Global. That entity’s Vice Chairman Daniel Yergin, during the interview was told by Jagdeo, “we believe that the companies that come to Guyana would do extremely well and we have to share the future of this prosperity.”

To achieve this however, he said this will require “companies to work with us a bit more.”

Expressing optimism on that front, he reminded that when the country began pressing for Local Content legislation, there was a hue and cry from the oil companies which complained that they were skeptical and were afraid that such a move would shut down the business.

Jagdeo said, this  did not deter the government and since its implementation it has seen numerous opportunities being directed towards locals.

The legislation, he said, has since changed the dynamics. Addressing the initial perception that had been associated with the nascent industry, Jagdeo was quick to point out that the goodwill for the industry has skyrocketed from when the time where persons viewed the operation as operating in an enclavic manner. He said, this was among the reasons government was looking to build local capacity as more and more opportunities in the oil and gas industry become available.  Jagdeo was adamant that the development of the industry locally should not be done where expatriates operate in an enclave and reiterated: “we are determined to see the benefits flow across the country.” This he said, would require a more people-oriented approach towards the development of the industry as against strictly business.

Having already condemned the conditions under which the lopsided arrangement that Guyana has tied itself into with the first Production Sharing Agreement (PSA) signed with Esso Exploration and Production Guyana Limited, Jagdeo was of the view that the country will in future see better returns. He at the time told the S&P Official, “we will build the capacity in future years but it’s not there now, and we can’t await the development of that capacity to move the industry along.” Qualifying his position, Jagdeo pointed to the pace at which the industry is moving along to which is forcing the administration to keep apace on the regulatory side.  The Vice President Jagdeo was quick to remind that even at a Net Zero target achieved in the world, oil and oil products would still be required. To this end, he pointed to the upcoming bid round or public auction in which there are some 14 offshore oil blocks up for offer.

Recognizing that this would be the first time in Guyana’s history, auctioning oil bocks, it has since retained the services of International Consultants, HIS Markit, “to help us through this process.”

He expounded further on the 14 blocks offshore oil blocks up for offer and noted that the process is open and that any company can bid on any of them. Jagdeo did speak to a caveat, in that any successful bidder would only be allowed to secure up to three oil blocks.

The reason, he said, was directly linked to the limited window within which the country can fully benefit from its resources and as such, “we want multiple companies exploring at the same time, we believe there is a window now.”

With the upcoming bid round on the Horizon, the former President now Vice President told the S&P official that the country is still looking to finalise a new model Production Sharing Agreement which would be beneficial to all parties. Playing up Guyana securing a bigger take under a new PSA, he spoke of planned consultations with the oil companies in finalizing that document. To date a number of international companies have already indicated an interest in bidding for those available oil blocks.

This publication understands that the auction of offshore oil exploration blocks has lured at least 10 companies including Shell, Petrobras and Chevron. Some 14 offshore blocks are up for offer in an attempt to speed economic development and reduce an Exxon Mobil-led consortium’s dominance of its oil sector. Winning bidders are expected to be picked next month. Companies interested in the April round have paid for seismic data to evaluate the blocks and decide whether to submit offers, according to the government.

They include six big international producers, Energy Minister Vickram Bharrat has said, without identifying the companies.

None of the companies has decided on bids as they wait for the government to release contract terms, the people familiar with the matter said. Guyana estimates it has up to 25 billion barrels of oil and gas in place off its coast. A consortium that includes Exxon Mobil, Hess and CNOOC operates the country’s most important area, the 6.6-million-acre (26,800 sq km) Stabroek Block, with more than 30 discoveries to date. Exxon, QatarEnergy, Shell, Chevron and Petrobras are among the oil giants that have paid $20,000 for the geologic information available on the 11 shallow-water and three deepwater blocks, the people familiar with the matter said.

Chevron’s main interest is to gain access to Guyana’s geological data, with the company already in possession of oil blocks in neighboring Suriname and Venezuela.

Exxon and QatarEnergy have said they are waiting for the full contract terms to consider a bid. Shell said it is evaluating the offshore lease sale to determine a possible participation.

Chevron and Petrobras are yet to make any public pronouncements.

The country has planned to issue a new PSA model for leasing offshore blocks by the end of this month, several weeks late. A draft proposal that would go through a two-week public consultation earlier missed its February 13, 2023 deadline with the auction is set for April 14.

The proposed terms is expected to nearly double the government’s take from oil production to 27.5 percent including royalties and profit oil, plus a new 10 percent corporate tax, compared to Exxon’s main contract.

The new agreement also will require producers provide more inform

The oil model also will set stricter terms for tendering and procurement, covering everything from production vessels to drilling suppliers. However, the terms will not affect Exxon’s Stabroek Block.

“We are not renegotiating Stabroek,” Vice President Jagdeo has reiterated on numerous occasions.

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• banking, Bharrat Jagdeo, companies, Guyana, Vice President

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