Lack of seismic studies, strict contract terms resulted in failure of country’s maiden bid round – Opposition

Jul 13, 2024 News

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Kaieteur News – The country’s first oil blocks auction has been deemed an “unmitigated disaster” by the People’s National Congress Reform (PNC/R).

During a press conference hosted by the Office of the Opposition Leader on Friday, the PNC/R’s spokesman on oil and gas, Elson Low pointed out that the government just announced seismic studies will be conducted in the unawarded blocks.

Low was keen to note that the revelation by Vice President, Bharrat Jagdeo during his Thursday press conference came after government hurriedly launched the country’s maiden bid round last year in the absence of seismic studies.

Last week, the VP revealed, “We have gone out for an expression of interest for 3D-seismic studies. We went (at) the last auction without any 3D-seismic so we didn’t had much data for the areas. So when you have less data, people don’t put in great bids because they don’t know what is there, they can’t interpret the data.”

Jagdeo said 3D-seismic may be conducted for the unallocated areas; however, this will not be paid for by the government. The data will however be shared with the Ministry of Natural Resources and other related agencies while interested oil companies will be required to pay for the information.

Seismic surveys can provide crucial information on subsurface rock layers. It involves emitting acoustic waves, recording their reflections and measuring their characteristics. Through this technology, oil and gas companies gain valuable insights into potential reserves.

To this end, the Opposition argued that seismic studies would have allowed bidders to access much more detailed information about each block.

As such, Low told reporters, “There was therefore understandable surprise when the government decided to push forward with the auction without the needed studies. Now, like a child who ran to play without doing his homework, Jagdeo has to go right back to conduct the very seismic studies he neglected.”

Guyana’s maiden auction launched in December 2022 featured 14 blocks but only eight received bids. In May this year, VP Jagdeo announced that Cabinet approved the award of Block S4, a shallow water portion, to TotalEnergies EP Guyana B.V. in consortium with Qatar Energy International E&P LLC and Petronas E&P Overseas SDN BHD.

Government said it is still in negotiations with the other bidders on the terms of the new Production Sharing Agreement (PSA), while others have been unable to pay the respective signing bonuses.

A minimum signing bonus of US$10 million is required for the oil blocks located in shallow waters and US$20 million for the oil blocks in the deeper water.

Low believes the sizing of the blocks, coupled with government’s lack of capacity to approve budgets for the oil companies and the fiscal terms in the new PSA have resulted in the “hit-or-miss” in the auction.

He said, “Without comprehensive seismic studies and large enough blocks to allow companies access to more than one type of oil prospect, as has been the convention with Guyana’s oil blocks, these strict terms were bound to turn investors away from the start, and lead to endless negotiations with those who were brave enough to stay the course.”

Consequently, Low noted, “The result of this is that the Cabinet has struggled to finalize agreements with companies to begin work on these blocks.”

The Opposition believes that a thorough review of any oil block that may be auctioned in the future must be conducted, in concert with seismic studies to ensure the blocks are proportioned accurately to attract investment.

Meanwhile, Low also opined that companies which are interested but unable to reach an agreement with the government for various prospects should be engaged to identify acceptable variances to the terms of agreement that would allow work to proceed.

“Further, rather than the Minister having authority to approve operational budgets, we stress once more the importance of a robust Petroleum Commission which can operate at a large enough scale, and great enough level of expertise, to ensure the smooth function of the industry,” the Opposition spokesman on oil and gas said.

He argued, “The PPP and Jagdeo must not be allowed to treat Guyana’s remaining oil blocks, and any acreage which is relinquished in the future, as personal property. This attitude has set any oil production in these blocks back by several years and as a result, may cost the country billions of dollars in deferred revenue at best and investor interest altogether at worst.”

Low was keen to note that there may be billions of barrels of oil in the remaining offshore oil acreage which underscores the crucial need for the country’s national assets to be managed prudently.

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• Auction, bid round, Blocks, seismic, studies

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