– auction to be open for several months
The much-anticipated auction of the oil blocks offshore Guyana will be launched soon as the People’s Progressive Party/Civic (PPP/C) Government is currently finalising the new fiscal terms and conditions to ensure the country maximises economic benefits from the exploration and production of hydrocarbon blocks offshore.
In a statement on Friday, the Natural Resources Ministry said “The 2022 bidding round, which is expected to be officially launched soon, and will be opened for several months which will give interested companies sufficient time to prepare their competitive packages and bid to win the available acreages offshore; which will be done in an open and transparent manner.”
Since the discovery of Liza in 2015, the Guyana offshore basin has seen unprecedented development, with Guyana setting a new paradigm for expeditious development of oil and gas resources. According to S&P Global, “the four- and-a-half-year time frame from discovery to the first production places Guyana first among global deep-water jurisdictions in terms of the average time to bring major discoveries on stream”.
With the upcoming bidding round, the Natural Resources Ministry outlined that the Government expects to chart a new path as the country’s offshore areas emerge as a potential super basin with over 11 billion boe (barrels of oil equivalent) discovered to date, and with substantial exploration activities ongoing, this figure is expected to increase significantly.
To this end, it was noted that Cabinet is concluding definitive terms of reference for the competitive licensing round which will foster a conducive investment environment while maximising value for the people of Guyana.
In this process, the Government seeks to obtain a fair share by ensuring the country gets a fairer share of revenues from oil and gas resources through improved fiscal arrangements to benefit the people of Guyana; manage risk by ensuring that it safeguards the safety of people and the environment by following international best practices in offshore oil and gas development; remain competitive by maintaining a competitive position in the region and globally as key to continued success; encourage investor confidence by assuring investors of stability, predictability, and security on investment; and maintain the pace of development by continuing with efficient and sustainable development of oil and gas resources whilst balancing the nation’s developmental agenda with its climate change goals.
“Guyana stands out as the most successful of the frontiers now having moved into early-stage production, and it is among the countries that have the best prospects of succeeding, given the current pace of development. Major oil and gas deep-water expertise has been key to unlocking the offshore basin’s potential and enabling the development of discovered resources.”
“Given that Guyana has adopted an open-door policy for acreage allocation, which, coupled with reasonably attractive fiscal and contractual terms has proven successful. This has allowed our oil and gas sector to set a new paradigm for accelerated deep-water development,” the Natural Resources Ministry stated.
To this end, it was pointed out that Guyana Government will be embarking on an intensive promoting campaign with all necessary technical data and requirements which will ensure that the competitive bidding round is successful for the future development of the offshore exploration and production of hydrocarbons for Guyana’s economy. Further, the Ministry assured, this process will be done in keeping with international best practices for transparency and accountability for competitive oil and gas bidding processes.
Earlier this month, during an interview on a local radio show, Vice President Bharrat Jagdeo indicated that the auction for relinquished and unexplored oil blocks will run until January/February next year.
The auction is expected to attract global interest, although experts have warned that it is important to balance the PSA’s (Production Sharing Agreement) fiscal terms.
During a recent visit to Guyana, Norwegian consultancy Rystad Energy Vice President Shreiner Parker noted that while Guyana will get interests from around the globe when it goes out to auction its oil blocks, getting the financial terms of the blocks right would be very important. He had given the example of Brazil.
“In recent years, they’ve had unsuccessful bid rounds. Even though Brazil is an extremely important source of offshore production globally, they were unable to attract the interest that it wanted, because the fiscal regimes were too onerous. And they were asking for too much.
“So, the balance that Guyana will have to strike on these new blocks is understanding that we’re no longer going to have the Stabroek fiscal regime. We are a petroleum province. Yet at the same time, we cannot expect that it’s a guaranteed success and that every hole poked into the ground will produce oil. So, getting that fiscal regime correct is going to be paramount to attracting interest globally.”
When asked if Guyana doing its own 3D seismic survey of the remaining blocks to establish the value of the blocks would help Guyana’s chances, he noted that while it could be of interest, it may not be necessary. As he put it, Guyana is already a hot story.
Guyana has long been expected to go out and auction oil blocks, both untapped and relinquished, by September. There are relinquishment clauses, which are 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.