Guyana Govt. incapable of fulfilling roles in new oil contracts – Exxon

Oct 19, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – The Ministry of Natural Resources, in its current state, is not capable of fulfilling many of its new duties which are prescribed in the nation’s new Model Production Sharing Agreements (PSAs) for deepwater and shallow water blocks, Head of ExxonMobil Guyana Limited, Alistair Routledge has said.

During a press engagement on Tuesday Routledge was asked by media operatives for his take on the new fiscal regime for oil blocks which includes a 10 percent royalty, profit sharing at 50 percent; corporation tax of 10 percent, and a property tax of 0.75 percent.

Routledge said he has no issue with the government’s imposition of new fiscal terms for oil blocks. In fact, Routledge said it is expected that following the discovery of 11 billion barrels of oil equivalent resources in the Stabroek Block, that the basin is now more attractive and the government would seek to take advantage of this with better terms for future award of oil blocks.

What Exxon does find difficulty with however, are the time periods governing the relinquishment of oil blocks. He reasoned that short timelines can make the effective hunt for oil prospects difficult. In fact, Routledge said the time periods are “unusually short” by industry standards.

In the model PSA that will govern shallow water blocks, it states that the exploration period shall not exceed five years. Within the first three years of the licence, companies will have to conduct a work programme approved by government. Upon fulfilling those responsibilities, the company will have the option to renew its licence to complete the remaining two years of exploration. The consequence of this renewal is that the company would have to return 50 percent of the block to the State.

In the model PSA for deepwater blocks, it states that an exploration licence will last for 10 years. After the first three years of working on the block, the oil company would have completed the first phase of the licence and would have to renew it, should it wish to enter the second phase lasting for another three years. The consequence of that renewal is that the company would have to return 50 percent of the block to the State. Upon completing the second phase, if the company wishes to advance to the third stage of the licence lasting for two years, it may do so only after relinquishing another 50 percent of the existing block.

If it wishes to apply to use the remaining two years on the licence then it would have to relinquish another 50 percent of the block.

Routledge questioned the reasonableness of these timeframes, alluding that it could be difficult for companies to execute contracts to acquire data on the respective blocks, process it and make decisions about the next phase which includes drilling. “So there are extremely short periods, and unusually short for our industry so we think that that is challenging,” the official said. The Country Manager said that his company has provided feedback on the PSA to government, indicating in no uncertain terms that, “we would not sign it as it was.”

Apart from his company’s concerns about the stringent timelines companies will have to work with to explore the oil blocks, Routledge said there are concerns about the capability of the ministry in fulfilling its duties in a number of new areas. “I think there were others who commented that the minister has an awful lot of control in the new PSAs. There are a lot of approvals required under the new PSAs and quite honestly, to date, I don’t think the ministry is set up to process, review and exercise those, even if they were the right authority to do that,” the Country Manager said.

He added, “So the balance between the approvals required and the amount of oversight versus the expectation on the operator to go ahead and execute the work is in our mind is out of balance.” Routledge confirmed that his company has yet to hear a response from the government on whether its bid is acceptable or not. “And that process, as you have learnt from the government, is still underway,” the Country Manager added.

At his last press conference, Vice President, Bharrat Jagdeo said the bids received for eight of the 14 oil blocks that featured in the country’s maiden auction are still being reviewed. Following that round of evaluation, the Natural Resources Ministry said the most responsive companies would be asked to make formal applications for the blocks. Those applications would then be gazetted. ExxonMobil Guyana Limited currently leads a consortium in the Stabroek Block offshore where five projects worth over US$40B have been sanctioned by the Guyanese Government. The company is currently going through a regulatory process to have a sixth project approved which would take the country’s output beyond 1.2 million barrels of oil per day by 2027.

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• Alistair Routledge, deepwater, ExxonMobil Guyana President, Model, Production Sharing Agreements (PSAs)

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