Govt. to greenlight Tullow’s sale of Orinduik stake to Canadian company

Sep 02, 2023 ExxonMobil, News, Oil & Gas

Kaieteur News – Government is preparing to sanction Tullow Oil’s divestment of its 60 percent interest in the Orinduik Block to Eco (Atlantic) Oil & Gas Ltd. This was confirmed during a press conference on Thursday by Vice President, Dr. Bharrat Jagdeo.

The chief policy maker for the oil sector said, “On the Orinduik issue, we have in principle agreed that the approval will be given for Tullow to sell its shares to Eco [Atlantic Oil & Gas] and to exit that block.”

Tullow is divesting the block by selling its subsidiary, which holds the block, to Eco’s subsidiary.

Tullow Oil’s decision has sparked curiosity in industry circles given the company’s potentially profitable agreement that allows it to cash in on Guyana’s oil bounty without significant direct involvement. The specifics of the deal indicate that Tullow stands to receive an initial cash sum of US$700,000 from Eco Guyana Oil and Gas (Barbados) Limited. The terms also include conditions that could see Tullow earning substantially based on the successes of the Orinduik Block. Should a successful commercial discovery be made within the Orinduik licence, Tullow would receive an additional US$4 million. Furthermore, an issuance of a production licence for the region by the Guyanese government would guarantee Tullow another US$10 million.

Despite the divestment, Tullow retains royalty rights. The company is slated to obtain royalty payments from future production within the Orinduik licence, translating to 1.75% of the 60% working interest revenue, after accounting for capital expenditure and lifting costs. This arrangement resembles someone accruing rent for a property they’ve relinquished ownership of.

While the financial structuring of the deal certainly showcases Tullow’s business acumen, it might raise eyebrows considering the active involvement of other companies in exploring and harnessing offshore Guyana. Tullow’s strategy of retaining benefits without substantial commitment could be perceived as audacious. With the Orinduik Block’s potential for commercial exploitation, Tullow looks set to earn alongside Guyana’s citizens, the rightful owners of the oil.

The new stakeholder, Eco (Atlantic) Oil & Gas Ltd., remains optimistic about the block’s potential, especially given its closeness to ExxonMobil’s Stabroek Block discoveries. As Eco takes on the operatorship, they are eager to drill a Cretaceous well. In this context, Gil Holzman, President and CEO of Eco Atlantic, stated, “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. We will proactively engage in a farm-out process for this highly prospective license and begin preparations to drill a well testing the cretaceous.”

Post-acquisition, while Eco will command a 75% interest, TOQAP Guyana B.V will retain a participating interest of 25%. Eco plans to farm out part of its stake to a new partner.

Canadian, Dr. Bharrat Jagdeo, Government, Orinduik, Vice President

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Govt. to greenlight Tullow’s sale of Orinduik stake to Canadian company

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