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New PSA finalised; companies ready to pay signing bonus – Minister Bharrat

Aug 17, 2024 News

Kaieteur News – Following the closure of the recent bid round to auction off eight oil blocks offshore Guyana, Minister of Natural Resources Vickram Bharrat told the media at his mid-year press conference on Wednesday, that the government has finalised the Production Sharing Agreement (PSA), and the six companies that were awarded have indicated that they are ready to pay their signing bonus and move ahead.

“That PSA has been finalized, I am happy to say that with no changes to the fiscal terms. With no changes to the fiscal terms and you know the new fiscal terms it is 10% royalty; it is 10% tax; it is 65% cost recovery as against 75 and it is the 50/50 profit sharing. So the 50/50 remains the same, 10% royalty, it is 10% tax, 65% cost recovery, meaning that we will get more upfront than the Stabroek agreement where it is 75% and we get more on the back end,” he told reporters.

The minister said that “every single one of those six companies, its six companies, eight blocks because two companies had bid for two. Every one of those six companies have submitted their applications to us, we have given them the PSA, they are currently reviewing that with the intent to sign and all of them have indicated that they are ready to pay their signing bonus. You know for the shallow water it’s $10M USD and for the deepwater it’s $20M USD.”

While he admitted that the bid round took longer than expected due to challenges faced before and during the process including other countries having their bid round as well.

He noted that the time frame also had nothing to do with the technical staff at the ministry but it was “mainly because we had to work with the bidders, some of them especially the locals were looking for international partners, they were looking for investors, they were looking for operators.”

Minister Bharrat said, “So we had to work with them. A few were ready but we cannot do a separate PSA for every different company. We had to finalize one PSA that can be used for all the companies. You can’t get a PSA to suit every other company that would bid, so a few bidders held up the others because we wanted to finalize one PSA that we can use.”

He emphasized that even though changes were made to the PSA until it suited every single company, the fiscal terms underwent no changes.

The minister explained that efforts were made to sort the work programme with the new companies.

“The work programme may differ for some companies and that is where we had to iron out a few issues especially with the penalties because you will know in the new PSA, the penalty is very heavy. That’s if you set a work programme for $300M and you cannot fulfill that then you pay us 50% of it, it is a steep penalty. So we had to work through a few of those issues without changing the fiscal regime,” the Natural Resources Minister said.

Additionally, the minister assured that as soon as the companies sign the PSA and pay the signing bonus, it will be made public.

“So with regards to the bid round, I am happy to say that we are moving forward with that but I know it has taken longer than it should have,” he told reporters.

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