Latest update January 23rd, 2025 7:40 AM
Repsol to claim US$500M in ‘pre-contract’ costs if Govt. renews Kanuku licence
Kaieteur News – With respect to discussions between Repsol and the government over the Kanuku block, it has emerged that the Spanish oil giant claims it has invested a staggering US$500 million in investments over the licence’s 10-year term. This means that if the government approves Repsol’s application for a fresh exploration licence, it would seek to reclaim the funds as ‘pre-contract’ costs in the future if the government renews its licence for the block.
“They claim that they have already invested about US$500 million in the block, three wells (were drilled) in the block. They have 3D seismic for the entire block,” Vice President Dr. Jagdeo stated Thursday.
The oil company could reclaim costs if it makes a discovery in the future and moves to production, but it will need a new licence, given that the term of the current one has expired.
“In May, effectively, the property was back with the government of Guyana,” noted Jagdeo. However, the company has the right to hold on to the block until its application is decided on. It has been conducting surveys in the meantime.
Jagdeo confirmed that the company submitted an application for a new licence, but noted that such a renewal is not automatic.
Map showing the Kanuku block offshore Guyana
Repsol’s past exploration wells did not yield commercial discoveries. Its journey since 2013 in the Kanuku block has been marked by highs and lows. Notably, the Beebei well drilled in 2022 held high hopes of uncovering 200 million barrels of recoverable oil equivalent. However, the findings were water-bearing rather than oil-bearing, marking a significant setback. Yet, the non-commercial Carapa-1 in 2020 indicates the potential extension of the Cretaceous oil play from the ExxonMobil-operated Stabroek block into the Kanuku licence.
Jagdeo has outlined the conditions under which Spanish oil company Repsol can renew its licence for the Kanuku block, which it has operated for the past decade. Chief among these conditions is Repsol’s compliance with the new Production Sharing Agreement (PSA) model and payment of a signing bonus.
“Should a policy decision be made that we will consider favourably their application for a new prospecting licence in that area, they would have to now comply with the new PSA, which is, one, the size of the block has to be reduced. Two, there would have to be a signing bonus. Three, all of the other conditions, including enhanced royalty, the new fiscal conditions, and every other condition of the new PSA would apply,” he said.
Furthermore, the complete consortium, including Tullow Oil, TotalEnergies, and Qatar Petroleum, would return to work together on the block if Repsol’s renewal is green lit.
The renewal of the licence is not a done deal; Jagdeo said that there is a concern that if the government goes this route to award the block through negotiations, rather than through competitive tender, other operators may want to apply for the same privileges. He explained that the competitive tender process is advantageous because it encourages aggressive exploration. The government is therefore expected to press Repsol for an aggressive exploration plan.
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