Int’l firm to help evaluate bids from oil blocks’ auction – VP Jagdeo

– says bidders supplied with new PSAs, other supporting documents

The People’s Progressive Party/Civic (PPP/C) Government is expected to utilise the services of the United States/British firm IHS Markit to review the bids it receives for the current auction of the shallow and deep oil blocks offshore Guyana.
Making this revelation was Vice President Bharrat Jagdeo, during a recent press conference where he also noted that both versions of the revised Production Sharing Agreement (PSA) have already been made available to bidders.

“I think the same IHS Markit, that worked with us on the preparation for the auction. The PSA, the Petroleum Activities Bill, they would be the firm to help us evaluate the offers,” Jagdeo explained.
“So, we’ve uploaded on the Ministry’s page, both versions of the PSA. The deep-water and shallow-water. You can see that there. And then the law will be sent to the bidders. So, all have been sent to the bidders already, as promised,” the Vice President further said.
IHS Markit previously provided Guyana with advice on the fiscal terms for the new model PSA, when the Government was working on it. Under the new model PSA, Guyana stands to benefit from as high as US$20 million signature bonuses for the auctioning of the deep-water blocks and US$10 million for the shallow-water blocks.
Additionally, all future PSAs would also include the retention of the 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.
IHS Markit is also known for the audit it did in 2019 of Exxon’s cost oil expenses racked up between 1999 and 2017. As much as US$214.4 million ended up being disputed, as IHS Markit flagged these cost oil claims.
IHS Markit is the product of a 2016 merger between two companies, United States (US)-based IHS and London-based Markit. Its data and information services business caters to industries such as automotive, energy, financial services, defence, and maritime.
The company has in the past published a number of write-ups and analyses on Guyana’s efforts to develop its capacity. This includes “Guyana’s deepwater areas will remain competitive, despite changes to fiscal terms (IHS Markit, 2018)” and “How activity in the Guyana mini basin is booming with five exciting discoveries since 2015 (IHS Markit, 2017)”.
The Guyana Government launched the current oil block auction in December 2022, putting 14 areas offshore up for grabs – 11 in the shallow area and three in the deep-sea area. The sizes of the 14 oil blocks on auction range from 1000 to 3000 square kilometres (sq km).

More than 20 renowned oil and gas companies have indicated their interest in buying oil blocks, and have already submitted bids. A previous July 15, 2023 deadline for companies to submit their bids for the oil blocks, was extended to September 12, 2023, a decision the Government attributed to ongoing efforts to improve the sector’s regulatory framework.
Those efforts include work to overhaul of the outdated 1986 Petroleum (Exploration and Production) Act. A few months ago, the Natural Resources Ministry released the draft Petroleum Activities Bill that will eventually replace the 1986 Petroleum Act, for a two-week period of public consultation. In it are a number of new provisions and very stiff penalties for those who fall afoul of the law.
Among the areas it looks to make improvement in is mandating that oil companies make tangible contributions not only on a social level but a capacity-building level. The Bill contains a provision enforcing petroleum exploration and production licences that may “provide for the payment of a training fee payable annually throughout the validity of the petroleum agreement.”
It also provides for oil companies to establish a system of financial support for environmental and social projects, which they will fund out of pocket. According to the Bill, “the terms of the programme and the financial contribution by the licensee are established in the petroleum agreement.”
Further, the Bill also contains stiff penalties. For instance, an individual can be fined up to $30 million and/or be subjected to up to three years’ imprisonment for any violations under the law. There is also a fine of not more than $10 million for failure to comply with any order issued under the law. The Bill was passed in the National Assembly only a few weeks ago. (G-3)