‘No extension to CGX licencse for offshore exploration’

Aug 02, 2024 News

---

 – Jagdeo says company not forthcoming with information requested

Kaieteur News – Cabinet is highly unlikely to extend the exploration license granted to CGX Energy Inc. and Frontera Energy Corporation, joint venture partners in the Corentyne Block offshore Guyana,  Vice President Bharrat Jagdeo has said.

Despite the company’s hopes for additional time to assess oil prospects, the government remains cautious. During his weekly press conference on Wednesday Jagdeo expressed dissatisfaction with recent responses provided by CGX to a series of government inquiries.

In response to questions at a news conference on Wednesday at Freedom House, Robb Street, Georgetown, he said, “Cabinet is not inclined to grant an extension to the license”.

He emphasised that while the company had been given some time to return with further updates, the information provided so far was insufficient. “We are not inclined to give any extension but [Cabinet] still wants some additional information,” he added.

According to Jagdeo, the company currently holds no license, relieving the government of immediate pressure to address the issues. CGX had retained a small portion of the Corentyne Block, having relinquished much of it as per its exploration agreement with the government.

In 2023, CGX discovered oil at its Wei-1 well, located 14 kilometers west of the Kawa-1 discovery within the block. Although oil was found at Kawa-1 in January 2022, CGX and Frontera chose to focus on the Wei-1 well. Further drilling in the Corentyne Block was said to depend on positive results at Wei-1, with the joint venture reportedly having no further obligations beyond this well. In a recent notice of potential commercial interest submitted to the Guyana Government, the joint venture sought additional time to appraise the Wei-1 discovery and evaluate its viability.

Back in May this year this newspaper reported that Houlihan Lokey, a leadIng global investment bank and capital markets expert was supporting active pursuit of strategic options for the Corentyne block, including a potential farm down, as it sought to develop the potentially transformational oil investment in one of the most attractive oil and gas destinations in the world today, Guyana.

This was disclosed to minority shareholder in the Corentyne Oil Block, CGX Energy Inc., which had released its unaudited Consolidated Financial Statements in May for the first quarter of 2024, which included a number of other transactions completed by the oil company and its partner, earning itself more cash.

The Company is the operator of the Corentyne block and currently holds a 27.48 percent working interest, while Frontera Energy Guyana Corp (“Frontera Guyana”) holds the remaining 72.52 percent interest in the block. To this end, the company reported that the 2023 JOA (Joint Operating Agreement) Amendment was completed during the fourth quarter of 2023, pending approval from the Government of Guyana.

Additionally, it was reported that according to the final cost of the Wei-1 well, the Company would have the right to receive from Frontera Energy Guyana Corp., a wholly-owned subsidiary of Frontera Energy Corporation a reassignment of 0.78 percent participating interest in the Corentyne block.

CGX however said back then that pursuant to that certain Closing Letter dated March 7, 2024, between the Company and Frontera Guyana, the Company has instead agreed to receive from Frontera Guyana the re-assignment of a 0.18 percent participating interest in the Corentyne block. This in addition to US$1.5 million cash consideration to cover certain other operating expenses of the Company, and US$0.6 million in settlement of other accounts payable related to the Joint Operations.

Additionally, it was reported that during April, 2024, the company received the cash consideration of $1.5 million from Frontera Guyana as part of the 2023 JOA Amendment signed on August 9, 2023.

Meanwhile as it relates to the investment bank’s farm into the oil block, CGX said “there can be no guarantee that the review of strategic options will result in a transaction.” The company last year made its second successful discovery offshore Guyana at the Wei-1 Well on the Corentyne Block, approximately 200 kilometers offshore Guyana. Previous reports indicate that the well was drilled in a water depth of approximately 1,912 feet (583 metres) to an anticipated total depth of 20,500 feet (6,248 metres). According to the partners the Wei-1 well encountered 210 feet of hydrocarbon bearing sands in the Santonian horizon. CGX and Frontera had commenced spudding the well in January last year and revealed that the operations would cost an approximate US$190-US$195 million to complete.

The Joint Venture had updated its previously announced discovery in the Maastrichtian and the Campanian intervals to 77 feet of net pay. Fluid samples were retrieved from the Campanian and Maastrichtian indicating the presence of light crude in the Campanian and sweet medium crude oil in the Maastrichtian.

The joint venture said the drilling operations were successfully completed with no safety incidents while the drilling rig is expected to be released early next month.  It added that the data acquisition program included wireline logging, MDT fluid samples and sidewall cores throughout the various intervals. Over the next few months, results will be integrated into the geologic and geophysical models to form an updated view of the entire northern portion of the Corentyne block.

The northern portion of the Corentyne block includes the channel complexes discovered by the Kawa-1 and Wei-1 wells, and a prospective central channel complex, which is yet to be evaluated. The Joint Venture is excited by the definitive presence of oil in the Maastrichtian and Campanian and the presence of hydrocarbons in the Santonian and believes there is significant potential in the block. Earlier this year, the partners said any future drilling in the block would be hinged on the success of the Wei-1 well.

After more than 20 years of exploration activity in the Corentyne Block, the Canadian partners finally struck oil in January 2022 at the Kawa-1 well. Kaieteur News in an earlier report detailed that the companies pumped more than US$350 million during that period before landing its first discovery. Prior to its two successful wells, the Canadian Energy companies drilled two wells in the Corentyne Block. These include Horseshoe in 2000 and Eagle in 2012.

 

 

---

• Cabinet, Corentyne Block, Freedom House, Georgetown, offshore, Robb Street

---