Govt to sign PSA with 4 oil companies in October – Minister Bharrat

Nearly two years after awarding several oil blocks offshore Guyana in the country’s first auction, the Guyana Government is gearing up to finally sign the Production Sharing Agreements (PSA) with four companies next month. “We are looking to sign the agreements in October with those four companies,” Natural Resources Minister Vickram Bharrat revealed during an appearance on the latest edition of the Starting Point podcast, which was aired on Sunday. According to the Minister, “The negotiation took some time, but I’m happy to say that we have wrapped up… I think, about four of those PSA will be signed in a month time or so… We have already made contact with those companies. They know themselves by now.”

Previous auction
In October 2023, Government had announced the award of eight deep and shallow-water blocks, which were auctioned off during the 2022 Licensing Round.
That first bidding round, which was launched in December 2022, closed off in September 2023 with six companies bidding on eight of the 14 blocks offshore that were up for grabs. In total, there were 14 offers made on those blocks – two deep-sea blocks and six shallow-area blocks. Among those awarded oil blocks during the bid round was a Guyanese female-led company, Sispro Inc, which received a shallow block (S3) and a deep-water block (D2). Other shallow blocks were awarded to Total Energies EP Guyana BV in consortium with Qatar Energy International E&P LLC and Petronas E&P Overseas Ventures SDN BHD (Malaysia), which got Block S4; Liberty Petroleum Corporation of the United States (US) and Ghana-based Cybele Energy Limited, which got Block S7, and International Group Investment Inc of Nigeria, which got two blocks – S5 and S10. Another shallow block, S8, was awarded to the Stabroek Block partners – ExxonMobil Guyana Limited, Hess New Ventures Exploration Limited, and CNOOC Petroleum Guyana Limited. The second deep-water block – D1 – was awarded to Delcorp Inc Guyana, which comprises Watad Energy and Communications Limited and Arabian Drilling Company of Saudi Arabia.

October signing
Since then, Government has been in negotiations with these oil block awardees, and earlier this year, the Natural Resources Ministry indicated that they were moving ahead with four of these companies. Among the bidders the Government will be signing PSA’s with are the consortium of TotalEnergies, Qatar Energy, and Petronas for block S4; International Group Investment Incorporated for block S5 and S10, and Cybele Energy for block S7. But during Sunday’s podcast, Minister Bharrat confirmed that Sispro Inc, the all-Guyanese women company, will also be signing an oil contract with the Government for one its awarded blocks.
“To date, we have successfully negotiated a PSA for the block in the shallow water [block S3] with Sispro. So, we’re moving ahead with that. And then at some point in the future, once we conclude the negotiation for the deep-water one, we will move forward with that,” the Minister noted. According to Bharrat, the PSA signing with the all women-led oil and gas company is especially significant for the country.
“I’m very proud that it’s a Guyanese company, especially our women folks, getting involved in the oil and gas sector. It shows that we’re expanding the way we think and taking a risk… It is part of our Government’s policy to ensure that young people and women are given opportunities in this space. They’re given the leverage and they’re supported to be engaged in investment, to be engaged in businesses. Today, we’re very proud to say that we’ll be signing a PSA with an all-women’s Guyanese group of investors, and that should be a very proud moment for all Guyanese,” he contended.

Model PSA
Meanwhile, the delays in signing the oil contracts from Guyana’s first bid round was partially rooted in efforts by the People’s Progressive Party/Civic (PPP/C) Government to update the PSA to ensure that the country gets more benefits from new oil deals. This saw the introduction of a series of stringent terms and conditions for new oil deals that the country will sign. These include the increase of the royalty from a mere two per cent to now a 10 per cent fixed rate; the imposition of a 10 per cent corporate tax, and the lowering of the cost recovery ceiling to 65 per cent from the previous 75 per cent, while maintaining the retention of the 50-50 profit-sharing after cost recovery.

The 2016 oil contract for the Stabroek Block signed between the ExxonMobil-led co-venturers and the then A Partnership for National Unity+Alliance For Change (APNU+AFC) Coalition Government for production in the oil-rich Stabroek Block had been heavily criticised for low royalty, lack of ring-fencing provisions and cost oil claims that saw Guyana losing billions, among other issues. Minister Bharrat explained during the podcast that not only was Government’s focus on ensuring that they bring better benefits to Guyana and Guyanese in the new PSAs moving forward but they also had to deal with the complexities that this first bid round brought.
“What didn’t happen in the past [with the 2016 PSA], we had to now ensure that there is a PSA for shallow-water development and a PSA for the deep-water development… So, at the same time, we were doing all of that. And then we started the negotiation with these companies, which took a while too because it goes back and forth. Most of these companies are not in Guyana so most of the time it’s virtual, most of the time it’s based on their availability.” “And we could have moved ahead with a few of these companies already, but what we wanted is to have a single Production Sharing Agreement for all companies in shallow and all the companies in the deep. We didn’t want a PSA for X company, a PSA for Y company, a PSA for R company. We wanted a PSA that will be signed by all companies…that is industry standard, and that is world class, and that will bring better benefits to Guyanese in comparison to the 2016 Stabroek Block PSA. So, that took some time, as you would imagine,” Bharrat noted. The Natural Resources Minister went on to say that there may very well be a need to review that model PSA to further update it to include near-shore or onshore development if those projects are found to present potential in the future.