Latest update April 4th, 2025 6:13 AM
Tullow positions itself to cash in on Guyana’s oil boom from a distance
Kaieteur News – Tullow Oil’s recent divestment of its 60% interest in the Orinduik Block has raised eyebrows. As details emerge of the company’s shrewd agreement, which could see it profiting handsomely from Guyana’s oil without the corresponding legwork, an essential question is: How do the Guyanese people benefit?
Under the terms of the deal with Eco Guyana Oil and Gas (Barbados) Limited, Tullow is set to receive an initial cash payment of US$700,000. Further provisions in the deal could allow Tullow to benefit significantly from any potential success in the Orinduik Block. A successful commercial discovery within the Orinduik licence would warrant an additional US$4 million payout to Tullow. More impressively, if the Government of Guyana issues a production licence for the area, Tullow stands to gain an extra US$10 million. These arrangements, in essence, paint a picture of a company poised to benefit from the toil and risk of others, while watching from the sidelines.
Moreover, the royalty rights embedded in the transaction are striking. Tullow is slated to receive royalty payments on future production from the Orinduik licence, amounting to 1.75% of the 60% working interest entitlement revenue, net of capital expenditure and lifting costs. This is akin to someone collecting rent on a property they no longer own.
There is no disputing the strategic brilliance of the deal from a financial standpoint. But other companies are actively putting capital and effort into exploring and developing offshore Guyana. Tullow’s approach of retaining a stake in the game without truly ‘playing’ may be seen as audacious. If the block’s resources are proven to be commercially exploitable – and this is likely – Tullow will be earning a royalty for the production, alongside the true owners of the oil, the people of Guyana.
Eco (Atlantic) Oil & Gas Ltd., which will be taking over the operatorship, is bullish about the block’s potential, notably due to the proximity to ExxonMobil’s Stabroek Block discoveries, among other things.
Armed with extensive research and an experienced team, Eco is gearing up to drill a Cretaceous well. Gil Holzman, President and Chief Executive Officer of Eco Atlantic, commented: “We are delighted to have reached this agreement with Tullow and to be able to begin to unlock the Orinduik Block’s full potential. Since 2014, we have believed in the potential of this Block, with our initial two wells in 2019 proving two different oil plays. We will proactively engage in a farm out process for this highly prospective license and begin preparations to drill a well testing the cretaceous, where all light oil discoveries have been made in the adjacent Stabroek Block.”
While Eco will hold a 75% interest, TOQAP Guyana B.V will continue to hold a participating Interest of 25%.
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