Govt to enforce relinquishment clause for unexplored oil blocks – VP

…blocks to be auctioned next year

The Guyana Government will be activating and enforcing the relinquishment provision in contracts, which speaks to handing over portions of the awarded oil blocks during the course of the exploration period.
At a press conference on Monday, Vice President Dr Bharrat Jagdeo signalled his Administration’s intention of auctioning new oil blocks no later than the third quarter of 2022. This would call for the enforcement of the Relinquishment Provision, thereby adding these acreages to the existing pool of blocks to be awarded.
“We’re hoping that latest next year third quarter, that we will be able to auction the new blocks. That requires us now to aggressively enforce the relinquishing provisions in all of the contracts so that added to the existing pool of areas available, we will have now the relinquished areas which can then form part of the auction that will take place,” said Jagdeo.
Guyana, with US oil giant ExxonMobil as the operator, began producing oil on December 20, 2019, in the Stabroek Block. Guyana’s oil revenues are being banked in the New York Federal Reserve Bank, where it is earning interest. ExxonMobil has said it anticipates at least six projects offshore Guyana will be online by 2027, with developmental drilling recently starting on the second one, the Liza Phase 2 project.
The relinquishment clause is typically included in contracts so that companies can relinquish a portion of the block when the renewable period is up, thereby allowing other companies to buy into the respective blocks.
For the Stabroek, Canje and Stabroek Blocks, operators are required to relinquish 20 per cent of their blocks after the first renewal period; while those of the Demerara and Corentyne Blocks are expected to relinquish 15 per cent within this period.
The Kaieteur Block’s relinquishment provision is said to be 25 per cent, then 20 per cent by the first renewal; with the Mahaicony and Roraima Blocks at 25 per cent. By the time of the first renewal for the Orinduik Block, the operators are not expected to relinquish any portion.

Auction
Speaking on the auction, he said Government is yet to decide whether it would increase the value of the areas by conducting a seismic scan of the blocks.
“To go to an auction, we have to make several policy decisions. We’d have to get somebody in who has done auctions before. Secondly, we have to make decisions like some countries are doing to shoot 3G seismic and then auction the block with seismic data which gives you a higher price; or to avoid that, just auction the areas as is.”

Ghanian experts in Guyana
Meanwhile, the Vice President underscored that Government has been working to set up a robust architecture for the management of the industry. However, it is time to move on to the next stage.
He pointed out that progress has been made in relation to the Local Content Policy, with the arrival of Ghanian experts as of Monday night. This follows a recent visit by the VP to the country, in order to secure skilled expertise in this department.
“We are going to utilise the skills of the people from Ghana to assist us in the architecture for the management of the industry. We have had a lot of consultants from Northern countries and elsewhere but it is time we go to a country that has actually had to work at building these institutions from scratch in a relatively short period of time.”
Leading the team is Ghana’s Deputy Minister of Energy; and Chief Executive Officers of both the Petroleum Commission and the Ghana National Gas Company. In the short term, Jagdeo said he has asked for their input in three areas as local authorities move to table the Local Content Policy by year end. Another technical team will arrive at a later date.
“Our Local Content Policy has been in the public domain for a very long time, almost a year. We’re wrapping it up now and we’re looking at key issues,” he related.
With legislation in place, Jagdeo said efforts will move towards the training of local workforce to capitalise in the industry. He pointed to one instance where they are seeking to have Exxon’s post-2017 expenditure done by Guyanese.
“We have been very disappointed that we have not been able to select a group to do an audit of the post-2017 expenditure by Exxon. The reason is that we did not have a strong local content. We had two local groups that came but they were not strong enough. We want to build the capacity to do this audit.”