…says strengthening oil framework as auction continues to attract int’l bids
The Government has further extended the deadline for companies to submit their bids for oil blocks to September 12, 2023, a decision it attributed to ongoing efforts to improve the sector’s regulatory framework.
On Wednesday, the Natural Resources Ministry revealed that the date for companies to submit their bids for oil blocks has been extended to September 12. It was explained that work continued to improve oversight for the oil and gas sector, making the extension necessary.
The 14 blocks that will be up for auction
For instance, the Government intends to soon complete the new Petroleum Activities Bill 2023, for which it had solicited public feedback. This will then add to the model Production Sharing Agreement (PSA) for deep and shallow blocks, completed earlier this year. According to the Ministry, once this is done, this will improve the economic measures for all licensees in the bid round.
“The Government’s continuous efforts to streamline and improve the petroleum regulatory framework and the resultant comprehensive feedback received from our stakeholders have led to this necessary extension,” the Ministry further explained.
“Whilst recognising the new era of oil and gas development and investors’ confidence in our economy, the Government is working to ensure that this competitive licensing bids and future rounds are governed by a modern regulatory framework with improved technical and institutional capacities.”
The Ministry also revealed that the bid round continues to receive strong global interest over eight months after it was launched. Initially, the Government had set a deadline of April 14, 2023 to receive bids in the oil blocks auction.
This date was then pushed back to July 15. One of the reasons for this had been the influx of applications and the increasing number of companies interested in the bid round. The Ministry explained that the intense interest in the oil blocks continued.
“The round, officially launched on December 9, 2022, continues to receive strong global interest. The Government has benefited from insightful feedback during the consultation periods of the Indicative Terms and Guidelines, the draft model production sharing agreements and the draft Petroleum Activities Bill.
“The Ministry of Natural Resources, and by extension the Government of Guyana, remains committed to the successful execution of the Guyana 2022 Licensing Round and the strengthening of the nation’s fiscal and legal petroleum management frameworks,” the Ministry explained.
Fourteen oil blocks are up for auction, with companies required to pay a US$20,000 fee to access the data room for the auction. The sizes of the 14 oil blocks on auction range from 1000 to 3000 square kilometres (sq km). Under the new fiscal terms in the draft PSA, Guyana stands to benefit from as high as US$20 million signature bonuses for the deep-water blocks, and US$10 million for the shallow-water blocks.
Additionally, all future PSAs would include the retention of 50-50 profit sharing after cost recovery; the increase of the royalty from a mere two per cent to a fixed rate of 10 per cent; the imposition of a 10 per cent corporate tax; and the lowering of the cost recovery ceiling to 65 per cent from 75 per cent.
Earlier this year, US oil giant ExxonMobil had said it was awaiting the final terms of the new PSA before it made a decision on bidding for the oil blocks offshore Guyana that are up for auction.
When the new PSA was released in June, Exxon had already registered for the bidding round. ExxonMobil Guyana President Alistair Routledge told Guyana Times that his company’s interest in the auction was fuelled by its successful oil finds offshore Guyana.
Vice President Bharrat Jagdeo has said that companies would be expected to show their financial capacity to actually develop these blocks. As part of the oil blocks auction, companies are in fact required to define their development plan and costs and the draft Bill stipulates that if they fail to pursue work in the given timeframe, there is a penalty that is almost equivalent to the cost of the development plan.
“So, for example, if you put that you will spend US$350 million to drill three wells and then you don’t do it in the period, you’ll now have to pay US$350 million in fine…some people question that, that it may be too high…right now there is no fine,” Jagdeo had explained at a recent press conference, noting that this was one area where some industry players have expressed concerns. (G3)
