Oil blocks auction: Govt mulls deadline extension as over 20 companies indicate interest

…PSA to be finalised in a week’s time – Min Bharrat

Natural Resources Minister Vickram Bharrat on Tuesday on the sidelines of an event stated that more than 20 companies have indicated their interest in buying oil blocks and have already submitted bids. These companies, he noted, are renowned in the oil and gas industry.
In light of overwhelming interest from the bidders, he noted that the Government is mulling an extension of the April deadline for submissions to allow other interested bidders to get their proposals in order.
This competitive bidding process will see 14 oil blocks up for tender – 11 in the shallow area and three in the deep-sea area.
“A lot of companies have been making requests to us to have an extension, because they have to prepare their proposal to send to us so that we may consider, however, it stands at April for now,” Bharrat explained.
However, he noted that of the 20 companies that have entered bids, at least half of them have already paid their fees to enter the Government data room.
“Ten companies actually paid the fee to get into the data room so…those companies we can say safely that we are sure about; …in terms of interest, we probably have double that in terms of companies reaching out to us for additional information on the bid round. So, I may not be able to tell you companies by name, but it is some of the major [International Oil Companies] IOCs around the world,” he stated.
Bidders are required to pay a US$20,000 fee that gives them access to the Government’s data room.
The sizes of the 14 oil blocks on auction range from 1000 to 3000 square kilometres (sq. km.). The round will be open until April 14, 2023. Evaluations and negotiations will follow, with a timeline for awards set in May 2023.
In addition, the Minister added that in a week’s time, Government will finalise the new Production Sharing Agreement [PSA]. “We have an international consultant from the US that is working on that and it should be finalised very shortly… I would say maybe in another week or so. We should have a few persons coming into the country from that team to work with our technical team to finalise the PSA,” Bharrat indicated.
Under new conditions, 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 will 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.
Only recently, US oil giant ExxonMobil had said that it was awaiting the final terms of the new PSA before it makes a decision on bidding for the remaining oil blocks offshore Guyana that are up for auction.
ExxonMobil Guyana President Alistair Routledge told Guyana Times that his company’s interest in the auction is fuelled by its successful oil finds offshore Guyana.
“Well, we’re always interested in new acreage. And clearly where we’ve had some success, that, you know, brings a certain degree of interest and we should be knowledgeable of it,” he said in response to a question by this publication on whether the oil major would be participating in the auction.
According to Routledge, Exxon has already registered for the bidding around and is now awaiting additional information from the Guyana Government before making any decisions.
“We’re taking a look at some of the data [from] the Government that they provide [on] what’s available. We’re awaiting the final terms for the new PSC (Production Sharing Contract). And when we have all of that together, then we’ll be in a position to make a decision on whether or not we bid and what we bid for,” he explained.
Currently, the 2016 oil contract for the Stabroek Block signed between the ExxonMobil-led co-venturers and the then Guyana Government pegs cost recovery at 75 per cent. The remaining 25 per cent of revenues is spilt 50/50 between the Government and the co-venturers, while the country also gets a two per cent royalty from total revenues.