Lack of Petroleum Commission, unlevel playing field interfered with success of oil blocks auction - Patterson

Lack of Petroleum Commission, unlevel playing field interfered with success of oil blocks auction – Patterson

Oct 08, 2023 ExxonMobil, News, Oil & Gas

Kaieteur News – Guyana’s recent oil blocks auction has garnered feedback from Shadow Oil Minister and Member of Parliament, David Patterson, expressing concerns about the government’s approach.

“First overarching comment – underwhelming,” Patterson stated, when asked about the performance of the auction. He pointed to a perceived lack of transparency and stability that may have deterred major oil companies from showing the same enthusiasm they once did.

“And I can tell you based on the hype they had… while we were in government in 2020, the major oil companies expressed interest directly to us that they were interested in [getting a block],” the MP said.

He added that companies like Chevron had expressed great interest, under the coalition government, in those same areas that were auctioned. “Fast forward three years, the manner in which they are going about seems very partisan… it lacks transparency.”

Patterson believes the current manner of management of the sector creates a sense of uncertainty for potential investors. He commented, “They would prefer some sort of stability.”

The absence of a Petroleum Commission was a prominent concern. He said companies are looking for a buffer between them and policy makers, one that a Petroleum Commission could potentially provide. He said this would offer them a level of comfort when dealing with Guyana. The government had promised this in its manifesto, but its yet to deliver, three years down the line. In addition to a Petroleum Commission, Patterson emphasized the need for a clear developmental plan for the oil and gas sector, which would provide certainty for investors for the next 10-15 years.

When questioned about the perceived uneven playing field in the sector, Patterson responded that the current infrastructure heavily favours one operator – ExxonMobil. He said CGX energy, despite making discoveries, is yet to put forward a development plan. Patterson explained that this is due to there being disparities in fiscal terms offered to CGX, as compared to ExxonMobil. Patterson also mentioned the vindictive environment these companies operate in, which might deter them from making these concerns public. CGX has made two significant discoveries at the Kawa-1 and Wei-1 wells, but have not pronounced on the commerciality of the finds. The government has said that all new discoveries outside of the Stabroek Block would have to be developed with the new fiscal terms, including a 10% royalty, a 65% cost recovery ceiling, and a 10% corporate tax. Meanwhile, ExxonMobil continues to add projects in the Stabroek Block, while benefiting from the internationally condemned fiscal terms, which include 2% royalty, a 75% cost recovery ceiling, and no taxes.

In addition to CGX, all awardees in the auction would also have to accept the new terms. The National Procurement and Tender Administration Board (NPTAB) revealed that six companies submitted bids for 14 of Guyana’s offshore oil blocks, with only eight blocks receiving bids. Although the government initially set the auction to run until April 14, 2023, delays pushed the submission deadline to September 12, 2023.

The Ministry of Natural Resources explained these delays were a result of efforts to improve the petroleum regulatory framework. Feedback from stakeholders also played a part. The government recently passed the Petroleum Activities Law and has also finalized new Model Production Sharing Agreements governing the awards of both deepwater and shallow water concessions. These blocks, range from 1000 square kilometers to 3000 square kilometers.

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Auction, companies, David Patterson, oil, Shadow Oil Minister and Member of Parliament

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